From 1 July 2027 the Capital Gains Tax discount on assets held more than 12 months changes. The 50% discount that has been in place since September 1999 is replaced by cost-base indexation plus a 30% minimum tax on the real (above-inflation) gain. The change was announced on Budget night, 12 May 2026, and the Treasury “Negative Gearing and Capital Gains Tax Reform” factsheet at budget.gov.au is the canonical source for the rules.
For an Australian investor holding a long-appreciating residential property, the natural question is sharp and time-bounded: does it make sense to sell before 1 July 2027 to crystallise the old 50% discount, or hold through and wear the new regime? This post walks the math, runs three worked examples, and ends with a decision framework you can plug into the live calculator before you have to commit.
Proposed, not yet legislated
The CGT reform was announced in the 12 May 2026 Budget and has been described in detail in the Treasury factsheet, but the Treasury Laws Amendment Act has not been registered as of mid-May 2026. The 1 July 2027 commencement date, the 30% floor rate, the CPI indexation method, and the income-support exemption are all policy intent rather than law. The Government has a clear majority, so the directional risk is implementation detail more than the change itself, but the dollar figures below should be treated as estimates that might shift slightly once the Bill is published.
The two regimes, side by side
Today, an Australian individual selling an investment property held more than 12 months gets a 50% discount on the nominal capital gain. The discounted half is taxed at the seller's marginal rate (which sits between 18% and 47% once Medicare is included). The tax bill is the discounted gain multiplied by that marginal rate.
From 1 July 2027 the rule changes to a two-step calculation:
- Step 1: indexation. The cost base is grown by CPI over the holding period. Only the real gain (sale price minus the indexed cost base) is taxable. This reproduces the indexation method that was in place between 1985 and 1999.
- Step 2: the 30% floor. The tax on that real gain is whichever is higher: marginal-rate tax (the standard income-tax bracket walk), or 30% of the real gain. The floor stops a low-income retiree from accessing bottom-bracket marginal rates by timing a sale into a year with no other income.
Recipients of means-tested income support payments (Age Pension, JobSeeker, Disability Support Pension, Parenting Payment, Carer Payment, Youth Allowance) who receive any payment in the financial year of the sale are exempt from the 30% floor. They pay marginal-rate tax on the indexed real gain regardless of how low it is. Most working-age FIRE investors will not benefit from this exemption.
Pre-1985 assets, the principal-residence exemption, the four small-business CGT concessions, and the 60% discount for qualifying affordable housing all stay unchanged. Investments held inside super (including SMSFs) are excluded from the reform: super continues to operate under its own 15% accumulation / 10% discounted rate. The reform applies to individuals, partnerships, and most trusts holding assets directly.
The transitional rule for assets held across 1 July 2027
For a property bought today and sold in 2032, the gain is split. The Treasury factsheet sets the rule explicitly: the pre-2027 portion keeps the 50% discount, the post-2027 portion gets indexation plus the 30% floor. The split point is the asset's market value at 1 July 2027.
Taxpayers will have two ways to determine that value. The first is a formal valuation as at 1 July 2027 (a real appraisal, usable for a property; quoted prices for shares). The second is the ATO's “specified apportionment formula” which back-calculates the 1 July 2027 value from the asset's growth rate over the whole holding period. The ATO will publish tools for this in due course.
The practical consequence: for a property already held today, the new regime applies only to the gain accruing after 1 July 2027. The pre-2027 portion is grandfathered into the old 50%-discount system regardless of when you ultimately sell.
This is the most-misunderstood part of the reform. Headlines have said “the 50% discount is gone.” The accurate statement is “the 50% discount is gone for gains accruing from 1 July 2027 onwards.” If you bought in 2015 and sell in 2032, more than 70% of the holding period sits in the old system. The new regime applies only to the slice after July 2027.
When does selling early win?
Selling before 1 July 2027 trades two things for each other. On the win side: the entire gain stays inside the old 50% discount, no transitional split required, no 30% floor risk. On the lose side: every additional year of compounding growth is forgone, and acquisition costs (agent fees, conveyancing, stamp duty re-entry if you ever buy again) are crystallised sooner rather than later.
The decision math is a comparison between two future-value numbers: the after-tax cash from selling on 30 June 2027 and investing the proceeds, versus the after-tax cash from selling later under the transitional rules. The result depends on four inputs: the property's expected capital growth rate, the sale year you would otherwise pick, your marginal tax rate in that year, and CPI over the remaining holding period.
Three patterns fall out:
- Selling earlier almost always wins when your post-retirement marginal rate is low. If you plan to sell in a no-other-income retirement year after 1 July 2027, the 30% floor will bind hard. The old regime taxes the discounted gain at your low marginal rate (often near zero after the tax-free threshold and LITO). The new regime floors you at 30% of the real gain. Crystallising the gain before the regime change is a clear win.
- Selling earlier rarely wins when your marginal rate is already above 30%. A pre-retirement worker on $200k income has a marginal rate around 39-47%. Their tax under both regimes is dominated by marginal, not the floor. The transitional split applies but the new-regime slice is only modestly worse than the old. Selling early to crystallise the discount means giving up several more years of compounding for a small tax saving. The compounding wins almost every time.
- The middle case is where it's close.Mid-retirement, modest other income, sale within 5-7 years of 1 July 2027. The transitional split keeps most of the gain in the old regime. The new-regime slice may or may not bind the floor depending on the size of the gain. The decision turns on the rate of capital growth between now and the planned sale year.
Three worked examples
Numbers are illustrative. They assume a single-owner investor, 2.6% CPI, 5% annual property growth, no agent or selling costs (which apply on both sides of the comparison anyway), and the FY27-28 Stage 4b tax brackets for the post-1-July-2027 sale. Each scenario can be replicated in the CGT Discount Changes Calculator by plugging in the cost base, sale price, holding years, and other income.
Example 1: Sydney unit, retired in 2028
Bought in 2015 for $620,000. Worth $1,050,000 today (May 2026). Plan A: sell on 30 June 2027 for an expected $1,103,000 (5% annual growth from today). Plan B: hold one more year and sell on 30 June 2028 for $1,158,000, in retirement with $20,000 of other income from a small bridge-year part-time consulting gig.
| Number | Plan A (sell Jun 2027) | Plan B (sell Jun 2028) |
|---|---|---|
| Nominal gain | $483,000 | $538,000 |
| Discounted gain (old rules) | $241,500 | (transitional split) |
| Pre-1-July-2027 gain (50% discount) | full $241,500 | ~92% of gain = ~$248k taxed at 50% discount |
| Post-1-July-2027 gain (new rules) | n/a | ~8% of gain ≈ $43k real gain |
| Other income in sale year | $160,000 (last full year of work) | $20,000 (bridge) |
| Approximate CGT payable | ~$95,000 | ~$26,000 |
| Post-CGT cash | ~$1,008,000 | ~$1,132,000 |
Plan B wins by ~$124,000. The combination of the transitional grandfathering (most of the gain still gets the 50% discount) and the much lower marginal rate in retirement (rather than at $160k income) more than offsets the year of additional growth being taxed under the new regime. Selling early would have been a costly mistake.
Example 2: Brisbane house, hold to 2035
Bought in 2010 for $480,000. Worth $920,000 today. Plan A: sell on 30 June 2027 for $966,000 with $180,000 of other income (peak earning years). Plan B: hold until 30 June 2035 and sell for $1,428,000 in a no-other-income retirement year.
| Number | Plan A (sell Jun 2027) | Plan B (sell Jun 2035) |
|---|---|---|
| Nominal gain | $486,000 | $948,000 |
| Pre-2027 share of holding period | 100% | ~68% (17y of 25y) |
| Old-rules CGT (on pre-2027 slice or whole) | full $486k discounted to $243k at 47% ≈ $114k | ~$644k pre-2027 portion discounted to $322k taxed at low rate ≈ $0-15k |
| New-rules CGT (post-2027 slice) | n/a | ~$304k post-2027 gain, indexed and floored at 30% ≈ $60-75k |
| Total approximate CGT | ~$114,000 | ~$60-90k |
| Post-CGT cash | ~$852,000 | ~$1,340-1,370k |
Plan B wins by ~$500,000. The compounding growth from 2027 to 2035 dwarfs the tax saving from crystallising early at peak marginal rate. The transitional grandfathering protects most of the pre-2027 gain even though the sale happens 8 years after the regime change. The 30% floor binds on the post-2027 slice, but it's a small share of the total.
Example 3: Dual occupancy, marginal call
Bought in 2018 for $720,000. Worth $1,180,000 today. Plan A: sell on 30 June 2027 for $1,240,000 with $140,000 of other income. Plan B: hold three more years and sell on 30 June 2030 for $1,435,000 with $40,000 of other income (semi-retired, part-time work).
| Number | Plan A (sell Jun 2027) | Plan B (sell Jun 2030) |
|---|---|---|
| Nominal gain | $520,000 | $715,000 |
| Pre-2027 share | 100% | ~75% (9y of 12y) |
| Old-rules CGT | $260k discounted at 39% ≈ $101k | ~$536k pre-2027 portion at $40k income ≈ $60-65k |
| New-rules CGT (post-2027 slice) | n/a | ~$160k post-2027 real gain ≈ $48k (floor binds) |
| Total approximate CGT | ~$101,000 | ~$108-113k |
| Post-CGT cash | ~$1,139,000 | ~$1,322-1,327k |
Plan B wins by ~$185,000. The marginal call is whether the capital growth in years 2027-2030 is worth the additional tax complexity (a transitional split and a floor that does bind on the post-2027 slice). In this case the growth is more than enough. The breakeven would be a real growth rate below ~2% per year over the post-2027 hold, which is unusual for Australian residential property over a 3-year window.
A decision framework
Two questions cover most cases:
- What is your marginal tax rate in the sale year you would otherwise pick? If it is at or above 39% (income over $135,000), the new regime is a modest drag on the post-2027 gain slice but rarely worse than your current marginal rate. Selling early to escape it usually costs more in forgone growth than it saves in tax.
- How long are you holding for, and what is the expected growth rate? The transitional split protects your pre-2027 gain. The longer you hold past 1 July 2027, the larger the new-regime slice becomes. But the longer you hold, the more total compounding you get. The calculator in the next section runs both sides for any specific combination.
Two cases where selling earlier might be the right call:
- The property is no longer fit for purpose anyway (negative cashflow you cannot service, plans to move overseas, divorce settlement). The CGT timing is a secondary factor; the decision is being driven by something else. In that case completing the sale before 1 July 2027 saves the transitional headache.
- You expect to be in a high-marginal-rate year for many years and you would crystallise in retirement otherwise. The floor binds hard in retirement years, the 50% discount is generous in working years. If the only reason you were planning to wait was to time-shift the sale into low-tax retirement, the floor partly neutralises that benefit and the calculus shifts.
The new-build exception
Investors who buy a new build retain the choice between the old 50% discount and the new indexation regime when they sell. At sale time they pick whichever produces the lower tax. New builds also retain full negative gearing access (the wind-back applies only to established properties purchased after 12 May 2026).
The new-build carve-out is intentional supply policy: the Government wants investor demand directed at properties that actually add housing stock. From an investor's perspective, a new build purchased after 12 May 2026 is on the old tax treatment for as long as the investor wants it, with no transitional complexity.
“New build” means a dwelling constructed on vacant land, or a knock-down rebuild that results in more dwellings than were there before. Substantial renovation that does not increase supply does not qualify. A new build cannot have been previously sold unless first owned by the builder and not occupied for more than 12 months.
What this article does not model
Selling costs (agent fees at 2-2.5%, conveyancing, settlement adjustments). Stamp duty on any re-entry purchase, which is often the dominant friction. Buying-back-in transaction costs if the plan was to redeploy the capital into another property rather than into shares or super. Land tax interactions and state-specific surcharges. Loss carry-forward treatment if you also held a loss-making rental in the same year.
For end-to-end FIRE planning that puts the property decision in context (super preservation age, bridge years, Age Pension means test, Monte Carlo sensitivity), use the full planner rather than a single-scenario calculator. The dashboard's Budget 2026 toggle re-runs the entire projection under the proposed rules and labels every affected output as “not yet legislated.”
Try it yourself
Model your own sale under both regimes
The CGT Discount Changes Calculator runs a single sale under both regimes side by side and shows the differential in dollars. Plug in your cost base, expected sale price, holding years, and other income to see whether the floor binds on your numbers.
Open the calculatorSources
- Treasury, Negative Gearing and Capital Gains Tax Reform factsheet (PDF). Primary source for the regime change, the 30% floor, the income-support exemption, the transitional split rules, and the new-build carve-out.
- Australian Government, Tax reform — Budget 2026-27. The Budget paper section covering the CGT and negative-gearing announcements.
- ATO, Capital gains tax. Reference for the current 50% discount rules and CGT event A1 timing (the contract date controls, not the settlement date).
- ProjectFi, How the 2026 Federal Budget Changes the FIRE Math. The broader article covering the rest of the Budget changes (negative gearing, WATO, instant work deduction, trust tax).