Lock Gains Before 1 July 2027: Prepare for Australia’s CGT Discount

From 1 July 2027, the 2026-27 Budget replaces that flat discount with CPI-based indexation plus a 30% minimum tax on real gains. Growth accrued before that date keeps the old discount; growth after it is taxed under the new rules.

TL;DR:

• To maximize the CGT discount, hold assets for at least 12 months and keep detailed records of purchase dates, costs, and residency periods.
• Growth accrued before July 1, 2027, will still qualify for the 50% discount, while gains afterward will be taxed under CPI indexation and a 30% minimum tax.
• Proper valuation and recordkeeping before the transition are crucial, especially for long-term assets, to accurately split pre- and post-reform gains.
• Investors should model potential outcomes now, using tools like AeroWealth, to decide whether to sell before or after the reform date based on their specific gains and timing.
• Capital losses may affect tax outcomes differently depending on whether they are realized before or after July 1, 2027, so timing and recordkeeping are essential.

Table of Contents

• How the 50% CGT discount currently works
• Who qualifies and common exclusions, traps to watch
• How to calculate CGT with the 50% discount
• What the 2026-27 Budget reforms change and the transition rules
• Practical investor actions now: valuation, recordkeeping, and planning
• AeroWealth’s perspective on planning for the 2027 changes
• AeroWealth: see your CGT outcomes before you decide
• FAQ
• Sources

How the 50% CGT discount currently works

If you are an Australian resident individual or trust and you have owned an asset for at least 12 months before selling it, you can cut your taxable capital gain in half. The ATO’s CGT discount guidance confirms the 50% rate for individuals and trusts, while complying superannuation funds receive a smaller 33.33% reduction. Companies generally cannot use the discount at all.

The discount is the last step, not the first. You calculate your gain, subtract any capital losses, and only then halve what remains.

• Individuals and trusts: 50% discount after losses are applied.
• Complying superannuation funds: 33.33% discount under the same ownership rule.
• Companies: generally no discount available.
• New-build affordable housing investments can qualify for an extra discount of up to 10% on top of the standard 50%, under eligibility rules described in government tax explainers.

The 12-month clock matters more than people expect, and it is where a lot of otherwise careful investors slip up.

Who qualifies and common exclusions, traps to watch

Residency is the first filter. Foreign or temporary residents generally cannot claim the full 50% discount on assets acquired after 8 May 2012, and the ATO notes the discount may instead be apportioned to the periods you were an Australian resident. If you moved overseas partway through owning an asset, expect to split the gain by residency period rather than claim the discount in full.

A handful of situations exclude the discount entirely or complicate it:

• You chose the indexation method for an asset acquired before 21 September 1999, which the ATO’s calculation guidance says blocks the discount for that asset.
• You converted a revenue asset into a capital one, or created a new asset rather than disposing of an existing one.
• The entity holding the asset is not widely held, which can affect trust distributions of discounted gains.
• Your ownership period falls just short of 12 months because you are counting from settlement instead of the contract date.

Pro Tip: Count your 12 months from the contract date of purchase to the contract date of sale, not from settlement, since that is the test the ATO applies.

If you have ever lived overseas, bought with someone else, or split time between Australia and another country, your residency records matter as much as your purchase contract. Our main residence exemption guide covers related recordkeeping if part of your history involves a home you lived in. Investors buying from abroad face extra residency complexity, which overseas buyer guidance addresses from the purchasing side.

How to calculate CGT with the 50% discount

The order of operations is fixed, and getting it wrong understates or overstates what you owe.

1. Work out your capital gain: sale proceeds minus your cost base, which includes purchase price, stamp duty, legal fees, and capital improvements.
2. Subtract any capital losses from the current year, then any losses carried forward from prior years, before touching the discount.
3. Apply the 50% discount to whatever gain remains (33.33% if you are a complying super fund).

Say you bought an investment property for $500,000 and sold it for $700,000 after 12 months, with $20,000 in selling and buying costs factored into your cost base. Your raw capital gain is $180,000. If you also realized a $20,000 capital loss on shares that year, you subtract that first, leaving $160,000.

One in two dollars of a long-term capital gain is removed from tax entirely under the current 50% discount, according to the ATO’s CGT discount rules, which is the single biggest reason the 2027 reform matters so much to long-term holders.

This figure gets reported in the capital gains section of your tax return, and the ATO’s calculation walkthrough has worked examples if your situation involves multiple assets or partial disposals. Our guide to capital gains tax on shares walks through the same order of operations for share portfolios specifically.

What the 2026-27 Budget reforms change and the transition rules

The 2026-27 Budget replaces the flat 50% discount with cost base indexation tied to CPI, combined with a 30% minimum tax on real capital gains, starting 1 July 2027. The change is prospective rather than retrospective.

The shift is framed as returning the CGT regime to taxing real gains, reducing the extent to which the tax system rewards holding an asset purely for the discount rather than for its underlying return.

The transition uses a split approach. According to the Budget’s tax explainer on trusts, growth accrued up to 1 July 2027 still qualifies for the 50% discount, while growth accrued after that date is taxed under the new indexation and minimum tax rules. An asset you have held for years will effectively have two tax treatments stitched together at the point of sale.

Not everything changes:

• The four small business CGT concessions are retained, and the explainer notes eligibility thresholds increase in some cases.
• The affordable housing extra discount remains available for qualifying new builds.
• New-build investors may in some cases choose between the 50% discount or the indexation and minimum tax approach for qualifying properties.
• The reform applies going forward only, so gains locked in through a sale before 1 July 2027 are unaffected.

This is a structural change to how long-term gains are taxed, not a tweak to a rate, and it rewards planning ahead of the date rather than reacting afterward.

Practical investor actions now: valuation, recordkeeping, and planning

The single most consequential task before 1 July 2027 is establishing a defensible value for each asset you hold on that date, since it becomes the reference point for splitting pre-reform and post-reform gains.

1. Get a formal valuation, or use the government-specified apportionment approach, for every investment asset you plan to hold past the transition.
2. Keep acquisition contracts, improvement invoices, brokerage statements, and residency evidence together, since the Budget’s tax explainer confirms these records support the cost base calculation at the transition date.
3. Review any capital losses you are carrying forward and consider timing their use against gains realized before versus after 1 July 2027, since the value of a loss differs depending on which regime absorbs it. Our tax-loss harvesting guide covers the mechanics in more detail.
4. Model your likely outcome under a few different inflation and return assumptions before deciding whether to sell before or after the transition.

Pro Tip: Photograph or scan every improvement receipt as you spend it, since reconstructing a cost base years later for a 1 July 2027 valuation is far harder than keeping records in real time.

AeroWealth’s perspective on planning for the 2027 changes

Rules changing mid-ownership create a specific kind of decision paralysis: sell now under the current discount, or hold and bet that indexation plus minimum tax works out better over time. There is no universal answer, because it depends on your inflation assumptions, expected holding period, and the asset’s growth pattern. What helps is seeing both paths modeled side by side with your actual numbers, rather than guessing. Evidence beats intuition when a tax rule is this structurally different from the one it replaces.

— Aerowealth Team

AeroWealth: see your CGT outcomes before you decide

AeroWealth lets you model what a sale looks like under the current 50% discount against what it looks like under the post-2027 indexation and minimum tax rules, side by side, using your own property or share numbers rather than a generic estimate.

The Free plan gets you started, and the Pro plan, at $7 AUD per month, unlocks deeper scenario comparisons and stress testing across your full retirement plan.

Check your numbers against both tax regimes on the AeroWealth pricing page before you decide whether to sell or hold.

This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

FAQ

Who is eligible for a 50% CGT discount?

Australian resident individuals and trusts that have held an asset for at least 12 months before disposing of it can apply the 50% CGT discount. Complying superannuation funds get a 33.33% discount instead, and companies generally cannot use the discount at all.

Is the 50% CGT discount being removed?

The flat 50% discount is being replaced, not removed outright, effective from 1 July 2027 under the 2026-27 Budget reforms. Growth accrued before that date still qualifies for the 50% discount, while growth after it is taxed using CPI-based indexation and a 30% minimum tax on real gains.

What is a simple trick for avoiding capital gains tax?

There is no legitimate way to avoid CGT outright on a taxable asset, but you can legally reduce it by holding the asset past the 12-month mark to qualify for the discount, or by offsetting the gain with capital losses in the same year. Timing a sale around the 1 July 2027 transition is also worth modelling, since the tax treatment differs on either side of that date.

Is capital gains tax changing in 2026?

The CGT discount itself does not change until 1 July 2027, when indexation and the 30% minimum tax on real gains take effect under the Budget’s tax reform plan.

Sources

• CGT discount | Australian Taxation Office
• Tax reform | Budget 2026–27

Recommended

• Capital Gains Tax on Shares Australia: Investor’s Guide
• Australian Retirees: How 2027 CGT Reform Changes Investment Tax
• Main Residence Exemption CGT: An Australian Owner’s Guide