The 50% CGT discount is changing from 1 July 2027. Here is how the new rules affect property investors
Australia's capital gains tax rules for property investors are undergoing one of the biggest changes in over two decades. Alongside changes to negative gearing, the 2026 Federal Budget introduced a major reform to how capital gains tax works for investment properties in Australia.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, meaning the long-standing 50% CGT discount will be replaced with a new inflation-adjusted indexation method from 1 July 2027.
This blog post covers how the new rules apply depending on when gains accrue, what they could mean for your tax bill, the exceptions in the legislation, and practical steps to take before 1 July 2027.
Key takeaways
- The 50% CGT discount will be replaced by an inflation-indexed cost base from 1 July 2027.
- The current discount will continue to apply to eligible gains accrued before 1 July 2027; the new rules apply to gains accrued from that date.
- Assets acquired from 1 July 2027 will be treated wholly under the new arrangements.
- Eligible new builds may retain access to the 50% CGT discount when sold.
- The reform applies to eligible CGT assets held by individuals, partnerships and trusts for at least 12 months.
- Investors should review their portfolio, records and tax position with their accountant before the changes begin.
Understanding the new 50% CGT discount rules
Before looking at how the new rules apply to different investors, it helps to understand the two systems being compared: the one that has applied for over two decades and the one that now replaces it.
The existing 50% CGT discount
Since 1999, individuals and trusts that hold an eligible investment property for more than 12 months have generally been entitled to a 50% discount on a capital gain when the property is sold. This concession has influenced holding periods and the timing of sales.
The new indexation model
From 1 July 2027, this flat discount is being replaced with an inflation-indexed cost base, effectively returning Australia to the system used between 1985 and 1999.
Instead of automatically halving the taxable gain, the cost base will be adjusted in line with inflation, and a minimum tax rate of 30% will apply to real capital gains accruing from 1 July 2027 when realised.
This ties your tax outcome more closely to the real, inflation-adjusted increase in your property's value, rather than the raw dollar gain.
Want to know where you stand under the current rules before they change?
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How do the new CGT rules apply based on your purchase date?
The timing of your purchase matters a great deal here, and it determines which set of rules, or which combination of rules, will apply to your property.
If you own the asset before 1 July 2027 and sell it later
The current 50% discount can continue to apply to eligible gains accrued up to 1 July 2027. Gains accruing from that date will be calculated using cost base indexation and may be subject to the 30% minimum tax rate.
Because the asset's history is split into two periods, its value at 1 July 2027 becomes an important reference point. That value can be established when the asset is sold through a valuation at 1 July 2027 or a specified apportionment formula, supported by ATO tools.
If you buy and sell before 1 July 2027
The existing CGT rules continue to apply. If the asset is eligible and has been held for more than 12 months, the current discount may apply. For CGT purposes, the acquisition date is generally the contract date rather than the settlement date.
If you acquire the asset from 1 July 2027
The asset will be treated wholly under the new arrangements. Its cost base will be indexed for inflation over the ownership period, and the minimum tax rules may apply when a gain is realised.
Investors entering the market after this date should build their return expectations around indexation and review their investment property loan options early so their finance strategy aligns with their broader tax position.
What does the end of the 50% CGT discount mean for your tax bill?
The effect depends on the purchase price, holding period, inflation, eventual sale price, marginal tax rate and any applicable minimum-tax exemption.
In periods of high inflation, indexation could produce a similar or even more favourable outcome than the flat discount. In periods of low inflation with strong capital growth, investors could end up paying more tax than under the old system. There is no single answer that applies to every investor, which is why personalised advice matters as this transition approaches.
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Which investors and properties are exempt from the CGT changes?
The new CGT rules include exceptions for eligible new builds, superannuation funds, main residences and certain other assets. Check the conditions before assuming an exemption applies, especially if you are choosing between a new build and an established investment property.
New build exemption
A new build refers to a residential property that genuinely adds to housing supply, such as a dwelling constructed on vacant land, or an existing property that has been demolished and replaced with a greater number of dwellings.
Investors who buy an eligible new build can choose between the existing 50% CGT discount and the new indexation and minimum tax arrangements when they sell.
Knock-down rebuilds and renovations that do not increase dwelling supply are not eligible. A new build generally cannot have been previously sold, except where it was first owned by the builder and occupied for no more than 12 months.
Entities outside the new CGT arrangements
The new CGT arrangements apply to individuals, partnerships and trusts holding eligible assets for at least 12 months. Superannuation funds, including SMSFs, and widely held trusts continue under their existing CGT arrangements.
Main residence and small business concessions remain unchanged
Your main residence stays fully exempt from CGT, which is also good news if you are looking at our first home buyer home loan solutions to purchase and live in your own property rather than hold it as an investment.
The four small business CGT concessions also remain unchanged: the 15-year exemption, the 50% active asset reduction, the retirement exemption up to a $500,000 lifetime limit, and the small business rollover. The turnover threshold for the active asset concession has also increased from two million to ten million dollars.
Affordable housing and pre-1985 assets
The existing 60% CGT discount for qualifying affordable housing is fully retained. Gains on pre-1985 assets accrued before 1 July 2027 remain exempt, with gains accruing from that date subject to the new rules.
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Practical steps to take before the CGT discount changes take effect
With the new rules now confirmed and set to apply from 1 July 2027, this is the right time to review your property portfolio and put a plan in place, rather than waiting until the changeover date is close.
Review your portfolio timeline
List every investment property you own along with its exact contract date, then sort each one into the relevant category based on whether it was bought before 12 May 2026, during the transition window, or after 1 July 2027.
This will help you see at a glance which properties will have a split gain calculation at sale, with part of the gain falling under the old discount and part under indexation. Keep purchase contracts and transfer documents easily accessible, since your accountant will need these to confirm the correct dates when the time comes.
Consider a valuation strategy
If you hold property purchased before 12 May 2026, speak with your accountant early about whether a professional valuation as at 1 July 2027 applies to you, since not every investor will need one.
If it does, book a qualified valuer well ahead of the deadline rather than after it has passed, as a later valuation cannot accurately reflect market value on that specific day. Once completed, keep the report safely on file, as it will serve as supporting evidence for your capital gains calculations when you eventually sell.
Reassess your buying and selling timeline
If you are planning a purchase or sale, model the likely outcome under both the current discount and the new arrangements. Avoid rushing a decision purely to beat a deadline; the right outcome depends on your full financial position.
Speak with both your broker and your accountant
Since this reform touches both financing decisions and tax outcomes, it is worth reviewing your strategy with professionals who understand both sides. Start by reviewing your current loan structure against your investment goals to see whether it still fits your plans under the new rules, and if it no longer suits your strategy, exploring refinancing options may help you restructure your finances around the new tax landscape.
Ask your accountant for a clear picture of your projected tax position across your portfolio, and if you are considering buying a newly constructed property, check whether it qualifies for the exception that lets investors keep the existing 50% discount instead of moving to indexation, since eligible new builds are treated differently from established properties under the new law.
This is exactly where our team at ZedPlus can help, as we operate as mortgage brokers and tax accountants under one roof, giving you a single point of contact for both sides of this decision.
50% CGT discount FAQs
1. Does renovating or improving my property affect how the new rules apply?
Capital improvements you make to a property, such as renovations, extensions or structural upgrades, are generally added to the cost base for tax purposes. Under the new indexation system, this becomes more significant, since a higher cost base reduces the eventual capital gain.
Keeping detailed records of renovation costs, including receipts and dates, will matter more than ever, as this documentation directly affects how much of your gain is taxable once indexation applies.
2. What happens if I make a capital loss after 1 July 2027? Can I still offset it?
Yes. Capital losses continue to operate under standard tax principles. If you incur a capital loss, it must first be offset against any capital gains realised in the same financial year. Any remaining net capital losses can be carried forward indefinitely to offset future capital gains under the new indexation framework.
3. Will my capital gains tax be higher or lower under the new indexation model compared to the 50% discount?
It depends entirely on your asset's rate of return and the level of inflation over your holding period. In periods of higher inflation, indexation can sometimes produce an effective tax outcome similar to or better than the flat discount.
However, in times of low inflation combined with strong capital growth, indexation will adjust your cost base by a smaller margin, meaning you could end up paying more tax on your nominal gain than you would have under the old 50% discount.
4. How will I know what my property was worth on 1 July 2027?
You can obtain a valuation as at 1 July 2027 or use the specified apportionment formula based on the asset's growth over the holding period. The ATO will provide supporting tools.
Final thoughts on the 50% CGT discount
This shift from a flat 50% CGT discount to an inflation-indexed model stands as one of the most significant changes to property investment tax policy in over 25 years. Investors who understand this new framework now will be better placed to make informed decisions about purchase timing, valuations and long-term hold strategies before 1 July 2027 arrives.
Every investor's situation is different, and this article is general information only, not personal financial or tax advice. Book a call with the team so we can review your specific circumstances, loan structure and tax position together.
