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 bought before 12 May 2026
If you purchased your investment property before Budget night on 12 May 2026, you continue to receive the current 50% discount on capital gains that accrue up to 1 July 2027. Any growth after that date will be assessed using the new inflation-indexed method, with tax payable at a minimum of 30% on that portion of the gain.
Because your property's history is effectively split into two periods, its market value as at 1 July 2027 is likely to become an important reference point, and many investors may need a professional valuation at that date.
If you bought between 12 May 2026 and 1 July 2027
Properties purchased during this transition window may be subject to both systems, depending on when you sell. If you sell before 1 July 2027 and have held the property for more than 12 months, the existing discount may still apply in full.
If you sell after 1 July 2027, gains accrued before that date may still qualify for the discount, while gains made after that date will fall under the new indexation method. One detail that catches investors off guard is that for tax purposes, the relevant purchase date is the contract date, not the settlement date.
If you buy after 1 July 2027
Investment properties purchased from 1 July 2027 onwards will no longer be eligible for the 50% discount at all. Instead, the entire cost base will be adjusted for inflation over the whole period of ownership before capital gains tax is calculated.
Investors entering the market after this date will need to build their return expectations around indexation from day one, and it is worth reviewing your investment property loan options early so your finance strategy lines up with the new tax outcome.
What does the end of the 50% CGT discount mean for your tax bill?
Because this reform replaces a decades-old concession with a new method entirely, many investors are asking how it will affect their actual tax bill. The answer depends on individual circumstances, including purchase price, holding period, inflation over that time and eventual sale price.
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 the number of dwellings are not eligible, and once a new build is sold to a second owner, that later buyer cannot access the 50% CGT discount on the property.
Self-managed super funds and widely held trusts are excluded
The indexation changes apply to individuals, partnerships and trusts. Widely held trusts, such as most managed investment trusts, and superannuation funds, including self-managed super funds, are excluded and continue under existing 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 only the growth from that date onward 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 considering a sale, the date of exchange relative to 1 July 2027 could materially affect your tax outcome. Take the time to weigh up whether exchanging before or after that date better suits your overall strategy, and where possible, model the likely tax outcome under both the current discount and the new indexation method. Avoid rushing a decision purely to beat a deadline, since the right outcome depends on your full financial picture rather than the calendar alone.
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?
Taxpayers can either get a formal valuation of the asset as at 1 July 2027, or use a specified apportionment formula that estimates the value based on the asset's growth rate over the full holding period. The ATO will provide tools to help estimate this figure for people who do not obtain a formal valuation.
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.
