A Major Overhaul for Investors: Australia's CGT Discount to Be Repealed
The Australian federal budget has announced a significant change to the capital gains tax (CGT) discount, set to take effect from 1 July 2027. Under the new rules, the current 50% CGT discount for individuals will be replaced with a cost-base indexation system.
Instead of a flat 50% discount, the original purchase price will be adjusted for inflation (using the CPI) to calculate the taxable gain.
This shift marks a fundamental change in how investment gains are taxed, moving away from a blanket reduction to a system that accounts for the time value of money.
How the Two Systems Compare
To illustrate the difference, consider a hypothetical property investor named Jan. Under the old system, with specific levels of price growth and inflation, Jan faces a certain tax liability. Under the new system—applying the same scenario—the tax outcome changes.
The final tax bill depends heavily on asset price growth, inflation, and holding period.
Explore the Impact with an Interactive Calculator
An interactive calculator has been provided for readers to personally explore how the two schemes compare. It allows you to adjust key parameters and see the results side-by-side.
Important Note on Transitional Rules
The calculator assumes the asset is held entirely under either the new or old scheme. For assets acquired before 1 July 2027 and sold after that date, a blended calculation using both sets of rules would apply. Investors holding assets across this transition period should be aware of the potential for a more complex tax outcome.