2026-27 Federal Budget

What the Budget means if you hold shares or other investments

From 1 July 2027, the 50% CGT discount is being replaced with cost base indexation and a 30% minimum tax on real gains. Pre-1985 assets are caught for the first time. Long-held portfolios with significant unrealised gains will be affected most.

Pre-1 July 2027

50% discount

Existing 50% CGT discount applies on gains accruing before 1 July 2027 — preserved even when sold later.

From 1 July 2027

Indexation + 30%

Cost base indexed for CPI, with a 30% minimum tax rate on the real (inflation-adjusted) gain.

Key valuation date

1 July 2027

Asset values at this date set the split between old and new method. Documentation matters.

How the change works

Two parts to the same reform

The Budget bundles two related changes that work together. The 50% CGT discount goes; indexation and a 30% minimum tax replace it. The transition is split — gains that accrued before the start date keep the old rules, gains after that date use the new rules.

Change 01

50% discount is being replaced

From 1 July 2027, the existing 50% discount on capital gains for assets held over 12 months will be replaced by cost base indexation. The cost base is adjusted upwards each year by the CPI — recognising inflation rather than discounting nominally.

Pre-1 July 2027 50% discount preserved. Gains accrued before the start date keep the existing treatment, even if you sell after 1 July 2027.
From 1 July 2027 Indexation applies. Cost base increases each year in line with CPI. Real (post-inflation) gain is the taxable amount.
Practical effect For high-return long-held assets, indexation is less generous than the 50% discount. For modest-return assets, it can be similar.

Change 02

30% minimum tax on real gains

A 30% minimum tax rate applies to real capital gains accruing from 1 July 2027. If your marginal rate would otherwise be below 30%, the gain is taxed at 30% regardless.

If your MTR is ≥30% No practical effect — you’re already above the minimum. The change here is just the loss of the 50% discount.
If your MTR is <30% The minimum bites. The traditional “realise gains in a low-income year” strategy is largely ended.
Exemption Recipients of any income support payment in the year (Age Pension, JobSeeker, DSP, Carer Payment, etc.) are exempt from the 30% minimum.

A change most clients don’t realise is coming

Pre-1985 shares are no longer forever-exempt from CGT

Shares acquired before 20 September 1985 have always sat outside the CGT regime. From 1 July 2027, that ends — though the historic gain remains protected, only future appreciation gets taxed.

For long-held portfolios

What changes — and what doesn’t

Pre-CGT assets — long-held shares acquired before 20 September 1985, or inherited from someone who acquired them before that date — have always been outside CGT entirely. Under the new rules, they’re brought into the CGT net from 1 July 2027. This affects clients with intergenerational share portfolios that have been treated as forever-exempt.

The key relief: only gains accruing after 1 July 2027 will be taxed. The historic appreciation — often the bulk of the gain on a 40-year-old portfolio — remains CGT-free. The cost base for Division 296 purposes resets to market value at 1 July 2027.

For clients with material pre-CGT holdings, establishing a defensible 1 July 2027 valuation matters enormously. For listed shares this is straightforward (closing price on the day). For unlisted or harder-to-value assets it may need professional assistance.

Worked example

A long-held single-stock holding sold in 2029–30

A typical client with a parcel of CBA shares bought at IPO in 1991. Showing how the split treatment works for an investor selling several years after the new rules begin.

David — investor on a 39% marginal rate

2,000 CBA shares bought 1991 at $5.40 ($10,800), sold 2029–30 for $360,000

David bought 2,000 CBA shares in the September 1991 IPO at $5.40. He’s held them for 38 years. CBA closed at $170 on 30 June 2027, making his parcel worth $340,000 at that date. He sells in late 2029-30 at $180 per share, receiving $360,000.

Pre-1 July 2027 portion Old method

Original cost (1991)	$10,800
Value at 1 July 2027 ($170 × 2,000)	$340,000
Pre-1 July 2027 gain	$329,200
Less 50% CGT discount	− $164,600
Taxable amount	$164,600
Tax at 39% (Medicare incl.)	$64,194

Post-1 July 2027 portion New method

Cost base (1 July 2027)	$340,000
Indexed cost base (2.5% CPI × 2yr)	$357,213
Sale price (2029–30)	$360,000
Real (indexed) gain	$2,787
Tax at 39% (above 30% minimum)	$1,087
Total tax on this portion	$1,087

David’s total CGT: $65,281. If he had sold the entire parcel on 30 June 2027 instead, under the existing 50% discount the tax would have been around $64,194 on the same $329,200 gain — almost identical. The new rules add a modest $1,087 because most of the gain accrued before the transition date, and there was relatively little real appreciation after it (the indexation almost matched the price growth). For long-held shares, the new regime is essentially neutral on the historic gain and only mildly worse on future gains — provided you sell within a reasonable time after the transition.

The story changes for shares bought after the transition

The example above shows a long-held position where most of the gain was already “banked” under the old rules. For shares purchased after 1 July 2027, the entire gain is under the new method — indexation rather than the 50% discount. For high-return stocks held for a long time, this is materially worse than the current treatment.

As a rough indicator: if your real (post-inflation) return averages over about 5% per year, you’re generally worse off under indexation than under the 50% discount when you eventually sell.

What this doesn’t change

Important carve-outs and exemptions

Several common situations are unaffected by the change. Worth knowing what these reforms don’t apply to.

Unaffected

Shares held in your SMSF

A Treasury official confirmed in the Budget Lockup that complying super funds, including SMSFs, will continue to receive the 33⅓% CGT discount. The effective rate on discounted gains stays at 10% in accumulation phase, 0% in pension phase.

Unaffected

Short-term gains (held under 12 months)

Capital gains on assets held for less than 12 months never qualified for the 50% discount in the first place. They’re still taxed at full marginal rates, with no indexation. No change.

Unaffected

Recipients of income support payments

If you receive any income support payment (Age Pension, JobSeeker, DSP, Carer Payment, etc.) in the year you realise a gain — even a part-pension — you’re exempt from the 30% minimum tax.

Unaffected

Capital losses

Capital losses can still be offset against capital gains in the usual way. Carry-forward losses retain their character. Losses don’t get indexed under the new method — they remain at face value.

What about foreign shares and global ETFs?

International shares (US-listed, foreign-listed) and ETFs holding global equities are treated the same way as Australian shares for CGT purposes. The cost base and sale proceeds are converted to AUD at the exchange rates on the respective transaction dates. The new indexation and 30% minimum tax rules apply identically.

The only complication is that foreign currency movements can amplify or offset the underlying investment return — but that’s no different from today’s rules.

What you should do

Practical steps over the next 18 months

Different actions depending on your portfolio mix and time horizon. For most clients, the first step is documenting what you hold and what it’s worth approaching the transition.

Document your cost base for every holding now

Whether or not you’re planning to sell, you’ll need defensible cost-base records by 1 July 2027. Original buy contracts, dividend reinvestment plans, corporate action adjustments, and any inherited holdings need proper documentation while the data is fresh.

If you hold pre-1985 shares — get a 1 July 2027 valuation plan ready

Listed shares are easy (closing price on the day). For unlisted, inherited, or hard-to-value assets, plan now for how you’ll establish the 1 July 2027 value. Pre-CGT gains stay exempt, but only if you can prove the value at the transition date.

If you were planning to realise positions anyway — consider the timing

If you were already going to sell shares between now and 2028 — for rebalancing, simplification, or to fund spending — bringing the sale forward to before 1 July 2027 keeps the 50% discount on the full gain. Don’t accelerate decisions that don’t make investment sense, but if the timing was already flexible, this is a meaningful factor.

If you’re a part-pensioner — the income-support exemption applies to you

Receiving any Age Pension (even a small part-pension) in the year you realise a gain exempts you from the 30% minimum tax. For clients close to but not over the pension cut-off, this interaction is worth modelling carefully.

If you split investments with a low-income spouse — the strategy weakens

The traditional approach of holding shares in the lower-earning spouse’s name to access lower marginal rates on disposal is significantly reduced — both the 50% discount goes and the 30% minimum kicks in. Worth reviewing whether the structure still suits.

Check how this interacts with your other Budget exposures

If you also have investment property, run a discretionary trust, or have an SMSF, the CGT changes interact with several other Budget measures. The full picture often produces different planning outcomes than any single measure would suggest.

This is an announcement, not yet legislation

The CGT changes are a Budget announcement. Consultation continues on detail, and the mechanics — particularly the 1 July 2027 transitional valuation approach, the treatment of capital losses, and the precise pre-CGT preservation rules — will be settled in legislation. Documentation makes sense now; irreversible decisions (selling solely for tax reasons) should wait for the legislation to be closer to final.

Other Budget changes that might apply to you

Share investors usually fit more than one of these

Most clients with share portfolios also hold property, have an SMSF, or run a business. The full picture matters — planning gets done across all of it, not just one slice.

If this applies

I own (or am buying) an investment property

Negative gearing limited to new builds from 1 July 2027, plus the end of the 50% CGT discount.

Read about property changes If this applies

I have a Self-Managed Super Fund

Division 296 from 1 July 2026 affects balances over $3 million. SMSFs keep the 33⅓% CGT discount.

Read about SMSF changes If this applies

I run a business through a trust

A 30% minimum tax on discretionary trusts from 1 July 2028, with rollover relief to restructure.

Read about trust changes If this applies

I run a small business

$20,000 instant asset write-off made permanent, loss carry-back returns, PAYG flexibility.

Read about small business changes If this applies

I’m a PAYG employee

Two more rate cuts plus a $1,000 instant deduction and the new $250 Working Australians offset.

Read about employee changes If this applies

I’m retired or close to it

Private health insurance rebate cut for 65+, CGT changes, pension supplement updates.

Read about retirement changes

See the real after-tax cost of your portfolio — not just the headline.

The CGT changes affect different portfolios very differently — long-held vs recent, Australian vs international, individual vs spouse-held, in-super vs out-of-super. We help clients model their specific position and plan accordingly.

Book an appointment Contact us