Capital Gains Tax — demystified

Does this affect me?

If you only own your home and your super — no. Both are explicitly untouched. If you own an investment property, shares, ETFs, or crypto outside super — maybe, but only on gains that build up after 1 July 2027. Anything you've already earned on existing assets keeps the old 50% discount.

Quick test:

• Just selling the home you actually live in? $0 tax — main residence exemption is untouched.
• Hold shares, crypto, or an investment property? You'll use a hybrid calculation when you sell — old rules on pre-July 2027 gains, new rules after.
• Earn under ~$45,000 in the year you sell? A 30% minimum rate may kick in (unless you're on income support — then you're exempt).
• Asset inside super or your SMSF? Unchanged — super keeps its own CGT rules.
• Bought before 1985? Gains up to 1 July 2027 still exempt; only gains after that get taxed.

TL;DR

From 1 July 2027, the 50% CGT discount is replaced for individuals, trusts and partnerships by cost-base indexation (CPI-adjusted purchase price) plus a 30% minimum tax rate on real gains. Your home, your super, your small-business CGT concessions, and pre-2027 gains on existing assets are all unaffected.

That's the whole change. Everything else online — that your house is taxed, that super is hit, that pre-1985 assets are now caught, that retrospective tax applies — is wrong.

Jargon decoder:

• Capital gain = the profit when you sell an asset for more than you paid. Only triggered when you actually sell, not while you hold.
• Cost base = what you originally paid (plus some costs like stamp duty and improvements).
• Indexation = bumping the cost base up by inflation (CPI), so you only pay tax on the real gain above inflation, not the nominal one.
• Marginal rate = the % tax you pay on your next dollar of income. For most workers it's 30% or 32%; high earners hit 47%.
• Main residence exemption = the rule that says you don't pay CGT on the home you actually live in.

What's NOT changing

What IS changing

Old rule (applies until 30 June 2027):

Taxable gain = (Sale price − Cost base) × 50%, taxed at marginal rate

New rule (from 1 July 2027):

Indexed cost base = Cost base × (CPI at sale ÷ CPI at purchase) Real gain = Sale price − Indexed cost base Taxed at max(marginal rate, 30%) on the real gain

The 30% minimum only bites when your marginal rate that year is below 30% — i.e. taxable income under ~$45k. Most investors are on 30%, 37% or 47% (incl. Medicare), so the minimum rate is mostly aimed at retirees, low-income years, and tax-deferral plays. Income-support recipients (Age Pension, JobSeeker, Youth Allowance) are exempt from the minimum tax.

Key dates

Worked example 1 — Your house

You buy a house in 2024 for $900,000. Sell 2035 for $1.4M. Lived in it the whole time.

Tax: $0. Main residence exemption untouched.

Worked example 2 — Shares bought after 1 July 2027

Zoe buys $10,000 of ASX shares on 1 July 2028. Sells 1 July 2033 for $12,500. Inflation 2.5%/yr.

Under the old system: ($2,500 × 50%) × 47% = $588.

Zoe is slightly better off because indexation absorbed most of the nominal gain. Low-return investments win under the new system.

Worked example 3 — Shares bought before 1 July 2027, sold after

Maya buys $50,000 of CBA shares in July 2020. Sells July 2032 for $120,000. ATO valuation at 1 July 2027 = $80,000.

Slice A (pre-1 July 2027 — old rules):

• Gross gain: $80,000 − $50,000 = $30,000
• After 50% discount: $15,000 taxable

Slice B (post-1 July 2027 — new rules):

• Indexed cost base: $80,000 × 1.025⁵ = $90,513
• Real gain: $120,000 − $90,513 = $29,487
• $29,487 taxable

Total taxable: $44,487. Tax at 47% = $20,909.

(Under the old system end-to-end: $70,000 × 50% × 47% = $16,450. Maya pays ~$4.5k more because post-2027 returns outpaced inflation.)

Worked example 4 — Crypto

Crypto is treated identically to shares. No special carve-out, no extra penalty.

Sam buys 1 BTC for $80,000 in March 2026. Sells 1 July 2030 for $200,000. ATO valuation at 1 July 2027 = $130,000.

Slice A: ($130,000 − $80,000) × 50% = $25,000 taxable Slice B: Indexed cost base $130,000 × 1.025³ = $139,996; real gain = $60,004 taxable

Total taxable: $85,004.

Hold under 12 months? Neither old discount nor indexation applies — full nominal gain is taxed. Same as today.

Worked example 5 — Investment property

Jane buys 1 July 2022 for $800,000. Sells 1 July 2032 for $1,600,000. ATO valuation at 1 July 2027 = $1,131,371.

Slice A: ($1,131,371 − $800,000) × 50% = $165,685 taxable Slice B: ($1,600,000 − indexed $1,131,371) = $319,958 taxable

Total taxable: $485,643. At 47% = $228,252 tax (vs ~$188,000 under the old system end-to-end). The ATO will publish a valuation tool to work out the 1 July 2027 split for your asset — keep an eye on ato.gov.au/cgt closer to the start date.

Worked example 6 — When indexation helps you

Ben buys an asset for $500,000 in July 2027. Holds 10 years. Returns just 2.5%/yr (matches inflation). Sells for $640,037.

• Indexed cost base: $500,000 × 1.025¹⁰ = $640,037
• Real gain: $0
• Tax: $0

Under the old system: nominal gain $140,037 halved to $70,021 taxable. Indexation saves Ben ~$24,858.

The structural shift in plain terms: good investments get taxed more, bad investments get taxed less. The 50% discount didn't care; indexation does.

Worked example 7 — The 30% minimum bites

Jack: uni student, $25,000 taxable income from a part-time job in 2029-30. Sells shares bought 2027-28, realises $10,000 gain.

• Tax at marginal rate (~14%): $1,400
• Top-up to hit 30%: $1,600
• Total: $3,000

If Jack received any income-support payment that year (Youth Allowance, JobSeeker, Age Pension), he'd be exempt from the minimum tax.

Myths vs reality

Myth 1: "They're taxing your family home" — FALSE

Main residence exemption stays exactly as it is — Treasury, the PM's media release, and every major advisory firm (Frasers, Pitcher, BDO) all confirm it. If you sell the home you actually live in, you pay $0 CGT, same as today.

Myth 2: "It's retroactive — existing shares are hit from purchase date" — FALSE

Only gains accruing after 1 July 2027 are subject to the new rules. Gains accrued before that get the old 50% discount, regardless of when you sell. ATO will provide valuation tools to split the gain. There is no incentive to panic-sell before 1 July 2027 — Treasury designed it that way to avoid market disruption.

Myth 3: "Pre-1985 (pre-CGT) assets are now taxable" — MISLEADING

Gains accrued on pre-1985 assets before 1 July 2027 remain exempt. From 1 July 2027 onward, gains accruing on those assets are taxed under the new regime. Pitcher Partners flags this as "a fundamental change for legacy holders" — but framing it as "pre-1985 assets are now taxed" without the "from 2027 forward" qualifier is wrong.

Myth 4: "Super and SMSFs are hit" — FALSE

Super funds (including SMSFs) are left alone on both negative gearing and CGT. Super keeps its existing 1/3 CGT discount in accumulation and 0% in pension phase. One of the most common false claims doing the rounds.

Myth 5: "Indexation is always worse than the 50% discount" — DEPENDS

Treasury's tables show 5-year holds get effective discounts of 42–59% under indexation — close to the old 50% on average.

Myth 6: "All landlords lose negative gearing" — FALSE

• Properties owned before 7:30pm AEST 12 May 2026: negative gearing preserved forever.
• Properties bought 12 May 2026 → 30 June 2027: gearing works until then, ring-fenced after.
• New builds purchased after 1 July 2027: full negative gearing available.

Only buyers of established dwellings from 1 July 2027 lose unrestricted negative gearing — and even then, losses offset other rental income or carry forward.

Myth 7: "Rents will skyrocket" — CONTESTED

Treasury models rents rising less than $2/week above baseline. Property Council disputes that. Independent housing economists are split. The catastrophic projections circulating on social media are not supported by either Treasury or independent modelling — but they're not provably wrong either. Watch this space.

Myth 8: "Crypto gets hit harder than shares" — FALSE

Crypto is treated identically to shares. Same indexation, same 12-month rule, same minimum tax. No special crypto treatment, no special penalty.

Myth 9: "Young investors saving for a deposit get hammered" — MOSTLY FALSE

Most young workers already have marginal rates ≥ 30%, so the minimum tax never bites them. Even where it does bite, indexation typically reduces the taxable gain for modest-return assets. Genuinely low-income people on income support are exempt from the minimum tax entirely.

Myth 10: "Startups will flee Australia" — GENUINE CONCERN

Tech Council of Australia, Blackbird, AirTree have raised real concerns about ESVCLP/ESIC interactions and angel investing economics. Treasury has explicitly committed to consult on the interaction between CGT changes and early-stage business incentives. Live debate, not myth — outcome depends on consultation.

Myth 11: "You pay the 30% minimum tax even if you don't sell" — FALSE

CGT only triggers on realisation (sale). Holding an asset that's appreciated doesn't create a tax event. Unchanged from today.

But what if...

...I'm just selling my home, do I owe anything? No. The home you actually live in (your "main residence") stays 100% exempt — same as today. Sell tomorrow, sell in 2040, doesn't matter.

...I bought my investment property back in 2010, am I caught? Only on the slice of gain that builds up after 1 July 2027. The ATO will value your property at that date and split the gain in two. The pre-July-2027 portion still gets the old 50% discount. Nothing retroactive.

...I have crypto held for less than 12 months? Same rule as today — no discount, no indexation. The whole nominal gain is taxed at your marginal rate. The 12-month rule didn't change.

...I'm on JobSeeker / Age Pension and sell some shares? You're exempt from the 30% minimum tax. You'll just pay tax at your normal marginal rate (which is usually low, since income-support payments push your taxable income down).

...do I need to do anything before 1 July 2027? Probably not. Treasury designed the rules so existing holders aren't forced to panic-sell. Pre-2027 gains keep the old discount even if you sell years later. Talk to your accountant if you're sitting on something complicated (private company shares, hybrid trust, pre-1985 holdings).

...does this kill negative gearing too? That's a separate change — see Negative Gearing demystified. Only new buyers of established residential dwellings from 1 July 2027 lose it. Everyone else is fine.

Where genuine debate lives

1. Startup / early-stage impact — government has flagged consultation.
2. Compliance cost of dual-regime CGT period — complexity is real and will require advisor support.
3. Whether reduced investor demand cuts housing supply — Treasury says small effect; Property Council disagrees.
4. Valuation disputes at 1 July 2027 — illiquid assets (private company shares, unique property) will be contested.
5. Behavioural response — Treasury assumes ~50% of trusts won't restructure; some advisors expect a much higher restructure rate.

A useful filter

When you see a strong claim about CGT, ask:

1. Does it specify the date? "You'll be hit immediately" → wrong. New regime starts 1 July 2027.
2. Does it acknowledge grandfathering? No → incomplete.
3. Does it specify the asset/entity? "Investors" without specifying established residential property after 12 May 2026 → likely misleading.
4. Does it cite the Treasury fact sheet? That's the authoritative document.

Sources

• Treasury fact sheet — Negative Gearing & CGT Reform
• Treasury — Tax reform statement (Budget 2026-27)
• PM media release — Tax reform for workers, businesses and future generations
• Pitcher Partners — Fundamental shift in CGT
• Baker McKenzie — CGT Discount and Negative Gearing
• William Buck — Federal Budget Analysis 2026 | Capital Gains Tax
• The Conversation — Are this budget's tax changes really an 'assault on aspiration'?

Related

• Theme 04 — Tax Reform (full policy detail)
• Negative Gearing demystified
• Discretionary Trusts demystified