So, what do the Budget changes to the CGT discount mean to you?
The proposed changes will allow any capital gain that has accrued before 1 July 2027 to continue to receive the 50% CGT discount. For gains that arise from 1 July 2027 onwards, the assessable amount would instead be calculated using an inflation‑based indexation method, and the resulting gain would be subject to a minimum 30% tax rate.
Before looking at the implications, it is important to outline the core elements of the proposal. The changes are not limited to real estate — they may also apply to assets such as shares held by individuals, trusts or partnerships. Different outcomes may apply for companies, superannuation funds and other excluded taxpayers.
Under the announced framework, the current 50% CGT discount would be replaced with cost‑base indexation, and affected gains would be subject to a minimum 30% tax outcome, subject to the final legislation.
Where an asset is acquired before 1 July 2027 but sold after that date, the gain will effectively be split. The portion of the gain that relates to the period up to 1 July 2027 may still qualify for the discount, based on the asset’s market value at that date. The portion of the gain that arises after that date would be calculated using indexation and taxed at no less than 30%.
Importantly, these rules apply to a broad range of assets — including shares — not just property.
A central feature of the transitional rule is the requirement to determine the asset’s market value on 1 July 2027. This is straightforward for some assets, such as publicly listed shares, but more complex for others, including real estate or assets in less liquid markets.
The ATO’s current position is that a formal valuation is not always required when the CGT rules call for a market value. However, the valuation method must be reasonable, evidence‑based and appropriate for the asset. For higher‑value or more contentious assets, obtaining an independent valuation may be prudent. If the Commissioner later disputes the valuation, the taxpayer bears the burden of demonstrating that their valuation is the more reliable one.
Another important consideration is whether indexation may produce a more favourable outcome than the discount — particularly for assets held over long periods or for shares that have increased only modestly above inflation. Timing also matters: realising a capital gain in a year where other income is low, or where capital losses are available, can reduce the overall tax impact.
Conclusion
These proposed CGT changes have the potential to influence significant planning decisions. It may be timely to discuss how the rules could apply to your circumstances and the options available to you.
