For nearly 25 years, the 50% capital gains tax (CGT) discount has been a cornerstone of how Australians invest. Hold an asset for more than 12 months, sell it for a profit, and only half of that gain is taxed. The 2026–27 Federal Budget proposes to change that — and for many investors across the Hills District, it’s the single most important measure to understand.
What’s actually changing
From 1 July 2027, the Government will replace the 50% CGT discount with cost base indexation and a minimum 30% tax on net capital gains. In plain terms, instead of automatically halving your taxable gain, the system will adjust your purchase price (your “cost base”) for inflation, so you’re only taxed on your real gain rather than the portion that simply reflects rising prices. A minimum 30% tax rate will then apply to those gains. The change applies to individuals, trusts and partnerships, and to assets held for more than 12 months.
The idea behind indexation is that you shouldn’t pay tax on inflation. If an asset doubled in nominal value over many years but much of that was simply inflation, indexation reduces the taxable gain accordingly. For assets with strong real growth held over shorter periods, however, the new system can result in more tax than the old 50% discount — which is precisely why timing and structure now matter more.
What is NOT changing
It’s just as important to be clear about what stays the same, because a lot of the early commentary caused unnecessary worry:
- Your family home is safe. The main residence exemption is not changing — the home you live in remains exempt from CGT.
- Superannuation is not affected. The CGT discount for superannuation funds is not expected to change, which makes super relatively more attractive as an investment vehicle.
- Existing gains are protected. The CGT reforms only apply to gains that accrue after 1 July 2027, so growth you’ve already built is not retrospectively caught.
- Pensioners are exempt. Income support recipients, including Age Pension recipients, are exempt from the minimum tax.
As with the other Budget measures, this is proposed and not yet law, so the final detail could shift before it is legislated.
Why timing of asset sales now matters
With a clear start date of 1 July 2027, investors have a genuine planning window. The question for anyone holding shares, managed funds or investment property with significant unrealised gains is no longer just “should I sell?” but “when, and through what structure?”
There is no one-size-fits-all answer. Selling before 1 July 2027 to lock in the existing 50% discount may suit some investors, but crystallising a gain early has its own tax cost and may not make sense if you’d otherwise hold for the long term. For others, the inflation-indexation approach may actually be favourable, particularly for long-held assets. The right move depends on your marginal tax rate, how long you’ve held the asset, your real versus nominal gain, and your broader goals.
The structural question
Because superannuation and certain structures are treated differently, the reforms are likely to prompt many investors to revisit how — not just what — they invest. That might mean considering whether future investing is better done inside super, or reviewing whether existing holdings are held in the most tax-effective name. These are decisions best made with advice and, where relevant, alongside your accountant.
At SMI Financial Solutions, we help investors look past the headlines and model what the new CGT rules actually mean for their portfolio — then build a plan with the time we still have before 1 July 2027.
Want to know what the 2026–27 Budget means for your situation?
Book a consult call with the SMI Financial Solutions team on 1300 222 484 or at smifinancialsolutions.com.au
Important information
This article is general in nature and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute financial, taxation or legal advice. The Budget measures referred to (including the proposed capital gains tax, negative gearing and discretionary trust changes) were announced in the 2026–27 Federal Budget and, at the time of writing, are proposed and not yet law; details may change before or if they are legislated. Before acting on any information, you should consider its appropriateness having regard to your own circumstances and seek advice from a qualified professional. SMI Financial Solutions Pty Ltd ABN 92 154 155 307 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049, AFSL 236523. Christopher Smith (478941) and SMI Financial Solutions Pty Ltd (418006) are authorised to provide credit services with Connective Broker Services ACN 161 731 111, ACL 384324. Infocus is not liable for any credit services provided by either entity. Your full financial situation will need to be reviewed prior to acceptance of any offer or product.