CGT Discount 2026 Budget: What Was Confirmed

Priya is 47, a senior physiotherapist in Brisbane. She bought an investment unit in 2018 for $580,000. It is now worth $900,000 — an unrealised gain of $320,000. Under the current 50% CGT discount, only $160,000 of that gain is added to her taxable income. From 1 July 2027 the rules change for growth after that date: the discount goes, the cost base is indexed for CPI instead, and the real gain is taxed in full at her marginal rate with a 30% minimum. For Priya, the $320,000 she has already made keeps the 50% discount whenever she sells. It is every dollar of growth from 1 July 2027 onwards that is taxed at her full 39% rather than at half of it.

The good news: the Budget confirmed grandfathering via a cost-base reset at 1 July 2027. Gains accrued on Priya's unit before that date are protected under the old rules. But she has a 14-month window to plan — and that planning starts now. Treasury estimates the CGT discount costs the budget $21.79 billion a year in foregone revenue, making it the single largest individual tax concession in the system.

What Is the 50% CGT Discount?

The CGT discount is an ATO concession that reduces the capital gain included in your taxable income. If you sell an asset you have held for more than 12 months, only 50% of the net capital gain is counted as income. The other 50% is discounted away — you pay no tax on it at all.

The rule applies to Australian resident individuals, trusts, and partnerships. SMSFs receive a one-third (33%) discount. Companies receive no discount. The current rules have been unchanged since 21 September 1999, when the Howard Government replaced the pre-existing inflation indexation system with the simpler percentage-discount approach.

Example: You sell shares bought in 2020 for $100,000 at $300,000 in 2026. Your capital gain is $200,000. Under the 50% discount, only $100,000 is added to your taxable income. If your marginal rate is 39%, your tax on that gain is $39,000 — not $78,000. From 1 July 2027, this changes.

Budget Update: What the 12 May 2026 Budget Confirmed

The Federal Budget delivered by Treasurer Chalmers on 12 May 2026 confirmed four key CGT and investment property changes:

1. 50% CGT discount abolished from 1 July 2027. All Australian resident individuals, trusts, and partnerships lose the 50% discount on gains from assets sold on or after 1 July 2027. SMSFs retain their existing one-third (33%) discount.
2. CPI indexation replaces the flat discount. From 1 July 2027, the cost base of qualifying assets is indexed to the Consumer Price Index (CPI). Only the real, above-inflation gain is taxed — the same mechanism that existed before 1999.
3. 30% minimum tax on the indexed gain. After indexation, the tax on the real gain cannot fall below 30% of it. The floor is a top-up: for anyone on the 32% bracket or above it changes nothing, because their marginal rate is already higher. Income-support recipients are exempt from it.
4. Negative gearing ring-fenced from 12 May 2026. Investors who enter a contract to purchase an established residential property after 7:30pm AEST 12 May 2026 cannot deduct net rental losses against other income. Existing investment properties and new residential builds are exempt from this restriction.

Pre-Budget Proposals vs What Was Confirmed

Two competing models were under Treasury consideration before Budget night. Here is how they compared to the confirmed outcome:

Model A — Flat cut to 33% (widely reported by RSM Australia and financial planning firms): The CGT discount would have been reduced from 50% to 33%, possibly targeting residential property only. Not confirmed — this model was not adopted.

Model B — Return to CPI indexation (CommBank Budget Preview, April 2026): Replace the flat discount with inflation indexation across all asset classes, as existed before 1999. Confirmed — with the addition of a 30% minimum effective tax floor not included in pre-budget commentary.

The Senate Select Committee on the CGT Discount (March 2026) recommended abolishing the discount for residential investment properties. The confirmed measures go further — abolishing it for all asset classes, not just residential property.

The Dollar Impact — Losing the Discount Under Confirmed Rules

Under the confirmed model the cost base is indexed for CPI and the real gain is taxed in full at your marginal rate. The 30% minimum is a top-up on that real gain, so for anyone on the 32% bracket or above it never changes the answer. What changes the answer is losing the discount: half your marginal rate on the nominal gain becomes your full marginal rate on the real gain. Whether that costs more depends on how far growth outran inflation.

The table uses an $800,000 purchase held five years with CPI at 2.5% a year, which indexes the cost base to $905,127, for a resident individual at a 39% marginal rate. These are gains accruing after 1 July 2027 or on assets bought after it; for an asset you already hold, only the growth after 30 June 2027 is taxed this way.

The crossover is growth of about double the inflation rate: below it the new rules can cost less than the discount did, above it more. In every row here 30% of the real gain is below the 39% figure, so the minimum does not bind. It binds only when tax at your marginal rate on the real gain would be under 30% of it — mainly the 17% bracket. A top-rate taxpayer pays 47% of the real gain. For one rental run at a 2027 and a 2029 sale with the split worked line by line, see should you sell before 1 July 2027? Confirm your position with a registered tax agent.

Negative Gearing: What Changed on Budget Night

The 2026 Budget confirmed a ring-fencing change to negative gearing that is separate from — but linked to — the CGT changes.

Established residential properties contracted after 7:30pm AEST 12 May 2026 can no longer have net rental losses (negative gearing) deducted against other income such as salary. Losses can still be carried forward and offset against future rental income or capital gains from the same property.

What is NOT affected:

• Properties contracted before 7:30pm AEST 12 May 2026 — fully grandfathered under current negative gearing rules
• New residential builds (off-the-plan, house and land) — exempt; negative gearing continues as an incentive for new housing supply
• Commercial property — not included in the ring-fencing change

If you're modelling a post-budget Queensland purchase to test whether the new-build exemption still produces a workable cash flow, factor stamp duty into the upfront cost — Queensland charges full transfer duty on non-FHB investment buyers (no concessions) plus an 8% Additional Foreign Acquirer Duty for foreign buyers. The Velofy QLD stamp duty calculator returns the exact figure for any purchase price and includes the foreign-buyer surcharge toggle.

Grandfathering: The Cost-Base Reset Mechanism

The Budget confirmed grandfathering for all existing CGT assets via a cost-base reset mechanism. Assets held as at 1 July 2027 will have their cost base reset to market value on that date. This effectively draws a line in the sand:

• Gains accrued from original purchase up to 1 July 2027 are assessed under the existing 50% discount rules when you eventually sell
• Gains accrued from 1 July 2027 onwards are subject to the new CPI indexation rules with the 30% minimum effective tax

This prevents investors from being fully taxed under new rules on gains that accrued over decades under a different framework. Consult a registered tax agent to model the exact interaction between the reset date, your acquisition date, and your planned disposal timing.

For what the reset is worth in dollars, our worked guide to selling before 1 July 2027 runs one $800,000 rental at a 2027 and a 2029 sale and computes the split tax line by line.

5 Actions for Investors Right Now

The Budget has been confirmed. Here are five concrete steps for property and share investors before 1 July 2027.

1. Calculate your current CGT position to 1 July 2027. Ask your accountant for a projected tax estimate if you sold just before 1 July 2027 under the current 50% discount — and compare it to the split if you sold just after: the discount on the gain to 30 June 2027, and your full marginal rate on the indexed growth beyond it. This gives you the exact cost of timing your disposal. Before you decide either way, check the suburb's rental yield — a property still yielding well is a stronger case to hold through the CGT change than one that's barely covering costs. Then calculate your true walk-away proceeds before and after the deadline — the sell-year selector models any sale year to 2056, with loan interest, selling costs and the CGT estimate in one number.
2. Review any property contracted after 12 May 2026. If you entered a contract on an established residential property after 7:30pm AEST on 12 May 2026, confirm with your accountant whether you can still claim negative gearing losses and restructure your cash flow if not.
3. Check the 12-month clock on all your holdings. The CGT discount — including the new rules from 1 July 2027 — requires assets to be held for more than 12 months. Assets acquired after June 2026 will not qualify for any discount treatment until after June 2027 at the earliest.
4. Assess the grandfathering mechanism for each asset. Ask your tax agent to model the cost-base reset at 1 July 2027 for each CGT asset you hold. For investors with large unrealised gains held since the 2010s, selling before 1 July 2027 under the current 50% discount may produce a significantly lower tax outcome — but this depends on your full income picture.
5. Do not panic-sell based on this article alone. A pre-July 2027 disposal locks in the 2026–27 income year, which may push you into a higher bracket depending on your salary and other income. Selling early is not automatically the right move. Get written advice from a registered tax agent before making any major disposal decision.