How the 50% CGT Discount Works and What the 2027 Reform Means for You

Capital gains tax is not a separate tax in Australia. A capital gain is included in your assessable income and taxed at your marginal rate. The profit from selling an asset is added to your income for that year.

When you sell a capital asset, such as an investment property, shares, or an exchange-traded fund, the difference between what you received and what the asset cost you is your capital gain. That gain is then included in your taxable income for that financial year.

When you sell an asset for more than you paid, the profit is a capital gain. In Australia, that gain gets added to your taxable income and taxed at your marginal rate. But if you have held the asset for at least 12 months before selling, the ATO lets you reduce the gain by 50% before it hits your tax return.

So if you sell an investment property and make a $200,000 capital gain after applying any capital losses, only $100,000 is added to your taxable income. If your marginal rate is 37%, your tax on the gain would be $37,000 rather than $74,000.

For an asset to qualify for the CGT discount you must own it for at least 12 months before the CGT event happens. The CGT event is the point at which you make a capital gain or loss. You exclude the day of acquisition and the day of the CGT event when working out if you owned the CGT asset for at least 12 months.

The ATO measures the holding period as 12 calendar months plus one day. If you buy on 1 March 2025, you must sell on or after 2 March 2026 to qualify. Selling on 1 March 2026 does not qualify.

In addition to the holding period requirement, Australian resident individuals, trusts (with some rules), and complying SMSFs (one-third discount) are eligible. Companies are not eligible for the CGT discount. Non-residents are generally not eligible for the discount on gains made after 8 May 2012.

Note that SMSFs receive a one-third discount rather than 50%, resulting in two-thirds of the gain being included in assessable income.

The discount applies to most CGT assets including shares, ETFs, cryptocurrency, investment property, and other investments.

Your main residence is generally exempt from CGT entirely under the main residence exemption, so the 50% discount is not needed for a home you have lived in throughout your ownership.

The steps involved in calculating your capital gain are as follows.

First, work out your cost base. The cost base and reduced cost base of a property include the amount you paid for it together with some incidental costs associated with acquiring, holding and disposing of it, for example legal fees, stamp duty and real estate agent commissions.

There is an important rule that catches many investors out: you generally cannot include an expense in the cost base if you have already claimed it as a tax deduction. This prevents the same cost being used twice for tax purposes.

Next, subtract the cost base from the sale price to get your gross capital gain. Then apply any capital losses from other assets. You calculate your capital gain, apply any capital losses, then halve the remaining amount. Only that discounted figure gets added to your assessable income.

The reason the order matters is that losses applied before the discount produce a smaller benefit than if they were applied after. You cannot choose which gains to offset losses against first. But if you have both discounted and non-discounted gains, you can apply losses against the non-discounted gains first to maximise your benefit. This is a legitimate strategy worth understanding.

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026.

From 1 July 2027, the Act replaces the 50% CGT discount for individuals and trusts with cost base indexation, while continuing to make the discount available for eligible new residential dwellings and affordable housing.

The two new mechanisms that replace the discount are:

Cost base indexation

Your cost base is adjusted upward using the Consumer Price Index from the date of purchase to the date of sale. This means the portion of your gain that simply reflects inflation is not taxed. Only real gains above inflation are included in your assessable income.

30% minimum tax on net capital gains

From 1 July 2027, any net capital gains from disposal of a CGT asset will be subject to a 30% minimum capital gains tax rate. There are limited exceptions. Income support recipients, including Age Pension recipients, will be exempt from the application of the minimum tax. If your marginal rate is already above 30%, your marginal rate applies rather than the minimum.

To maintain incentives for new housing supply, individuals and trusts disposing of new residential dwellings or affordable housing on or after 1 July 2027 may choose between applying the 50% CGT discount or the new indexation-plus-minimum-tax regime.

The final Act hard-codes new residential dwellings as the sole exception. Any future extension would require fresh legislation through both houses.

The exemption is available only to the first investor purchaser. Subsequent purchasers of the same property are not eligible for the 50% CGT discount.

This is the most important section for anyone who already holds investment assets.

Every asset held at 30 June 2027 is deemed sold and reacquired under Subdivision 112-E of the Act. The pre-reform gain keeps the 50% discount and is deferred until you actually sell, with the split set by market valuation at 1 July 2027 or an elected apportioning method.

In plain terms: no tax is payable at that moment. The deemed disposal is a paper exercise only. When you eventually sell the asset, your total gain is divided into two portions. The gain that accrued up to 1 July 2027 is calculated under the old rules and the 50% discount applies to it. The gain that accrues after 1 July 2027 uses the new cost base indexation rules.

The asset's value at 1 July 2027 is the boundary between the two regimes. Market valuation at 1 July 2027 is the primary method. Listed assets use closing prices, while property owners should keep a contemporaneous valuation or appraisal. An apportioning method determined by the Minister is available as an alternative.

This is a question for your accountant or registered tax agent, not a general guide. The right answer depends on factors specific to your situation, including the size of your unrealised gain, how long you have held the asset, your marginal tax rate, the transaction costs of selling, and what you would do with the proceeds.