13 May 2026 Federal Budget Annoucements – Changes to Capital Gains Tax
As widely anticipated, the Government will replace the current 50% CGT discount with inflation-adjusted indexation from 1 July 2027. The changes will include a minimum tax rate of 30% on realised gains, and the CGT net will be broadened to include pre-1985 assets (for disposals from 1 July 2027).
These changes will apply to all CGT assets held by individuals, trusts and partnerships for more than 12 months.
The changes take effect from 1 July 2027 and will be prospective; gains accrued on existing investments prior to the start date will retain the 50% discount up to the start date. Transitional arrangements will ensure the changes only apply to gains arising on or after 1 July 2027. This means the 50% CGT discount will continue to apply to gains arising before 1 July 2027.
Capital gains on pre-1985 assets arising before 1 July 2027 will remain exempt from CGT.
New property assets: option to choose
There will be an exception for new builds. Investors in new residential properties will be able to choose either the 50% CGT discount; or cost base indexation and the minimum tax. Income support payment recipients, including Age Pension recipients, will be exempt from the minimum tax.
This is designed to maintain incentives for the construction of new housing.
Proposed minimum tax rate on realised gains
There is little detail on the proposed minimum tax rate of 30% (to be imposed after indexation has been applied). The Budget Papers state that “a minimum tax rate on capital gains will reduce the incentive to hold onto an asset to realise a gain when it’s most tax advantageous and ensure a fair amount of tax is paid on capital gains, in line with lifetime incomes”. Income support recipients, including pensioners, will be exempt from the minimum rate.
This is only an announcement of what the Federal Government is planning to implement – it is not law yet and may change or not proceed subject to its debate and passage through Parliament.