The 12 May 2026 Budget replaced the 50% Capital Gains Tax discount with inflation indexation plus a 30% minimum tax on the real gain, effective 1 July 2027. Recipients of means-tested income support payments are exempt from the floor. The change is announced rather than legislated, but the Treasury “Negative Gearing and Capital Gains Tax Reform” factsheet at budget.gov.au sets the mechanic explicitly and is the source for the numbers below.
This post walks five worked scenarios through the live ProjectFi CGT Discount Changes Calculator. Each scenario is a real combination of inputs you can replicate in the calculator in under 30 seconds, with the result interpretation explained. The goal is to make the new regime concrete for the cases that matter for Australian FIRE planners.
Proposed, not yet legislated
The Treasury Laws Amendment Act for this measure has not been registered as of mid-May 2026. The 1 July 2027 commencement date, the 30% floor rate, the CPI indexation mechanic, and the income-support exemption are all policy intent rather than law. The calculator uses the most plausible interpretation based on the pre-1999 indexation method that the new regime appears to restore. Numbers shown should be treated as estimates that might shift slightly when the Bill is published.
How the calculator works
Five inputs drive the result: cost base (original purchase price plus acquisition costs), sale price, holding years, other taxable income in the sale year, and a CPI assumption for the inflation indexation. There's also an income- support recipient toggle that bypasses the 30% floor.
Both regimes are computed at FY27-28 Stage 4b tax brackets so the comparison is regime-on-regime rather than mixed-up with bracket changes. The old regime applies the 50% discount to the nominal gain and taxes the discounted half at marginal rates with LITO offset and Medicare Levy phase-in. The new regime computes the real gain by compounding the cost base at the CPI rate, then takes whichever is higher: marginal-rate tax on the real gain, or 30% of the real gain. The result card shows old-rules tax, new-rules tax, the dollar differential, and which constraint binds.
Example 1: Lean FIRE bridge year
The default preset on the calculator. A small annual share sale to fund a year of bridge-phase living, with no other income.
| Input | Value |
|---|---|
| Cost base | $45,000 |
| Sale price | $80,000 |
| Years held | 12 |
| Other income in sale year | $0 |
| CPI assumption | 2.6% |
| Income support | No |
Result:
| Output | Value |
|---|---|
| Old rules tax | ~$0 (discounted gain under tax-free threshold) |
| New rules tax | ~$5,640 (30% floor on the real gain) |
| Differential | ~+$5,640 worse under new rules |
| Constraint that binds | 30% floor |
Why the floor binds: the $35,000 nominal gain becomes ~$18,800 of real gain after the indexed cost base grows from $45,000 to ~$61,200 over 12 years at 2.6% CPI. At zero other income, the marginal tax on $18,800 of taxable income is essentially zero (sits under the $18,200 tax-free threshold once LITO is applied). 30% of $18,800 is ~$5,640. The floor is the binding constraint.
This is the case where the new regime hurts proportionally the most. The old system rewarded timing gains into low-income years; the new system explicitly stops that.
Example 2: Closeout in retirement
Large position sold in retirement to fund a mortgage payoff or portfolio rebalance. The user has some yield income from the rest of their non-super wealth.
| Input | Value |
|---|---|
| Cost base | $400,000 |
| Sale price | $700,000 |
| Years held | 12 |
| Other income in sale year | $14,000 |
| CPI assumption | 2.6% |
| Income support | No |
Result:
| Output | Value |
|---|---|
| Old rules tax | ~$44,500 |
| New rules tax | ~$47,000 |
| Differential | ~+$2,500 worse under new rules |
| Constraint that binds | Marginal narrowly exceeds the floor |
This is the case where the floor does not bind: the gain stacked on $14k other income produces a marginal-rate tax bill that narrowly exceeds 30% of the indexed real gain. The difference between the two regimes is small in dollar terms. Importantly, this contradicts the simplified rule of thumb “the floor binds in retirement” — once LITO and Medicare Levy phase-ins are modelled accurately, marginal-rate tax on a $150,000 discounted gain (the old regime's taxable amount) lands at roughly 30%, so the constraint is marginal-rate, not the floor.
Example 3: High-income worker, pre-retirement
Same asset sale as Example 2, but at peak earnings.
| Input | Value |
|---|---|
| Cost base | $400,000 |
| Sale price | $700,000 |
| Years held | 12 |
| Other income in sale year | $200,000 |
| CPI assumption | 2.6% |
Result:
| Output | Value |
|---|---|
| Old rules tax | ~$70,000 (47% marginal on $150k discounted) |
| New rules tax | ~$73,000 (47% marginal on ~$156k real gain) |
| Differential | ~+$3,000 worse under new rules |
| Constraint that binds | Marginal rate (floor irrelevant) |
At top-bracket marginal rates, the floor is a non-event. The old regime gave the 50% discount on $300k of nominal gain; the new regime taxes the indexed real gain of ~$156k at marginal rate. The slight difference reflects the indexed gain being slightly larger than the discounted gain in this particular cost-base / CPI / hold combination. The decision for a high earner is not “sell early to avoid the floor.” The decision is “does the after-tax return of holding compare favourably to selling and redeploying.” That's a portfolio-construction question, not a tax-regime question.
Example 4: JobSeeker recipient on the lean bridge
Same lean-bridge inputs as Example 1, but the user receives JobSeeker (or any means-tested income support payment) in the sale year and ticks the income-support toggle.
| Input | Value |
|---|---|
| Cost base | $45,000 |
| Sale price | $80,000 |
| Years held | 12 |
| Other income | $0 |
| Income support | Yes |
Result:
| Output | Value |
|---|---|
| Old rules tax | ~$0 |
| New rules tax | ~$0-300 (marginal on $18.8k real gain, no floor) |
| Differential | ~$0-300 worse under new rules |
| Constraint that binds | Income-support exemption applied |
The exemption removes the floor entirely. The new regime becomes marginal-rate tax on $18.8k of taxable income, which is essentially zero after the tax-free threshold and LITO. For a JobSeeker recipient (or any means-tested income support payment per the Treasury factsheet — Age Pension, DSP, Parenting Payment, Carer Payment, Youth Allowance), the new regime is roughly tax-neutral for a small annual bridge sale. Without the exemption the same person would have owed ~$5,640. That's a meaningful difference if you happen to be in the cohort.
Practical caveat: the exemption requires you to actually receive a payment in the financial year of the sale. A retiree who just lost income-support eligibility (assets test cutoff, divorce settlement, inheritance) cannot tick the toggle for that year.
Example 5: Long-held property across 1 July 2027
The most complex case. An asset bought before the regime change, sold after. Treasury's transitional rules split the gain at the asset's 1 July 2027 value: the pre-2027 slice keeps the 50% discount, the post-2027 slice gets indexation plus the 30% floor.
The standalone calculator does not model the transitional split — it treats the input as a pure single-regime comparison. For a property held across the boundary, the full ProjectFi planner's Budget 2026 toggle re-runs the whole projection with per-property apportionment baked in. The math is described in detail on the methodology page.
For a worked walkthrough of the transitional split for investment property specifically, see Selling Investment Property Before 1 July 2027.
How to read the result card
The calculator's result panel surfaces three numbers and a label. They're worth reading carefully because each carries information the headline differential alone misses.
- Old rules tax. Tax attributable to the gain alone under the old 50% discount, FY27-28 brackets. The decomposition (run total-tax with-gain minus total-tax without-gain) captures bracket crossings, LITO phase-out, and Medicare phase-in correctly — it is not just “gain × marginal rate.”
- New rules tax. Same decomposition under the new regime: indexed real gain with the 30% floor (and the income-support bypass when ticked).
- Differential. New minus old. Positive (the common case) means the new regime costs more. Negative is possible when the indexed cost base eats the entire gain (very long hold, high CPI) and the marginal-rate tax under the old regime exceeds zero.
- Badge label. One of three values. “Income-support exemption applied” means the floor was bypassed by the toggle. “30% floor binds” means the floor was the active constraint, not marginal rate. “Marginal rate applies (floor does not bind)” means the marginal-rate tax already exceeded 30% of the real gain — the floor would never have mattered.
What the calculator does not model
Single-asset, single-year. No multi-asset portfolio comparisons. Jointly-owned assets need each owner's half run separately. HECS/HELP, the Medicare Levy Surcharge, and the full Age Pension means test are out of scope. The indexation uses a single user-set CPI rate compounded annually as a proxy — the actual ATO formula will likely use quarterly CPI ratios chained from acquisition quarter to disposal quarter, similar to the pre-1999 method.
For end-to-end FIRE planning that puts the CGT decision in the context of your super, Age Pension, bridge years, and Monte Carlo sensitivity, the full ProjectFi planner runs every year of the projection under the proposed rules when the Budget 2026 toggle is on.
Try it yourself
Run your own numbers through the calculator
Plug in your cost base, sale price, holding period, other income, and CPI assumption. The result card shows both regimes side by side with the dollar differential. Takes under 30 seconds.
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 (means-tested payments including Age Pension and JobSeeker), and the transitional rules.
- Australian Government, Tax reform — Budget 2026-27. The Budget paper section covering the announcement.
- 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).
- ProjectFi, Selling Investment Property Before 1 July 2027. The companion article for the transitional split on long-held property.