Capital Gains Post Budget:What It Means For You

As part of budget night we all heard about the changes to the 50% discount on capital gains being replaced with indexation and a minimum tax rate of 30%. If this bill passes this will effect individuals, partnerships and trusts.

The proposed Capital Gains Tax (CGT) changes starting 1 July 2027 will change how investment profits are taxed in Australia. Currently, individuals who hold an asset for more than 12 months can generally reduce their capital gain by 50% before paying tax. Under the proposed reforms, this discount would be replaced by a system that adjusts the asset’s purchase price for inflation, meaning tax would be paid only on the real gain above inflation.

For example, if you bought shares for $100,000 and sold them years later for $160,000, your capital gain would be $60,000. Under the current rules, you may only be taxed on $30,000 after applying the 50% CGT discount. Under the proposed system, the purchase price would first be increased to reflect inflation, and tax would then apply only to the gain above that adjusted amount.

The Government says the changes are designed to create a fairer tax system and improve housing affordability by reducing tax incentives that favour investment in existing assets. Existing investments are expected to receive transitional protection, with gains accumulated before 1 July 2027 generally remaining subject to the current rules.

Rest assured if you are selling your investments prior to 1 July 2027, you will be safe from these new laws.

Author

Natasa Briffa