Capital Gains Tax (CGT) is set for one of the biggest changes to Australia’s investment tax system in years.

Under the 2026 Federal Budget, the Government announced plans to replace the existing 50% CGT discount with an inflation-based system and introduce a minimum 30% tax rate on real capital gains from 1 July 2027.

For Australian investors, this could change how investment decisions are assessed, particularly for assets that experience significant growth over time.

In this episode of The Account Rant, Latitude Accountants CEO John Saade sits down with Leigh Morris, founder of SFP Financial and the voice behind Financial Leigh, to break down the proposed changes and discuss who could potentially benefit and who could be worse off.

One of their biggest concerns is uncertainty. When investors cannot easily predict how their future capital gains will be taxed, long-term investment and structuring decisions become harder to make.

What Is Changing With Capital Gains Tax in 2026?

The current CGT system generally allows eligible individuals and trusts that hold an asset for at least 12 months to access a 50% CGT discount.

The 2026 Federal Budget proposes a different approach from 1 July 2027.

The Government plans to:

• Replace the 50% CGT discount with a discount based on inflation.
• Introduce a minimum 30% tax rate on real capital gains.
• Apply the new rules to capital gains accruing from 1 July 2027.
• Preserve the existing treatment for capital gains accruing before 1 July 2027.
• Give investors in eligible new-build property a choice between the existing 50% discount and the new arrangements.

The Government says the purpose is to tax the real gain after accounting for inflation rather than providing a flat 50% discount.

For investors, however, the practical outcome can vary significantly depending on the asset, its growth rate, and how long it is held.

How Does the Current 50% CGT Discount Work?

Under the existing system, an eligible individual or trust that holds a CGT asset for at least 12 months can generally reduce the capital gain by 50%.

For example, imagine an investor purchases an asset for $500,000 and later sells it for $800,000.

The capital gain is $300,000 before considering other relevant adjustments.

Under a 50% CGT discount, the investor may only need to include $150,000 of that gain in their taxable income, assuming they meet the relevant eligibility requirements.

This system is relatively easy to understand.

The proposed indexation model introduces another variable: inflation.

What Is CGT Indexation?

Under the proposed system, the cost base of an eligible asset would be adjusted for inflation from 1 July 2027.

This means investors would generally only be taxed on the real capital gain after accounting for inflation.

The Government describes this as a return to taxing real capital gains rather than applying a flat discount.

For investors, this could produce very different outcomes depending on how an asset performs.

Example: A Slowly Growing Asset

Imagine an asset increases in value relatively slowly over a long period.

If much of that increase simply reflects inflation, indexation could reduce the taxable real gain.

This could make the new system attractive for certain long-term investments with modest growth.

Example: A Fast-Growing Asset

Now consider an asset that experiences substantial growth.

A business, property, shares or another investment could increase significantly in value over a relatively short period.

In this situation, inflation may account for only a small portion of the overall gain.

The investor could therefore face a larger taxable gain than they would have under the old 50% discount.

This is one of the key concerns raised by John and Leigh in their discussion.

Who Could Benefit From the New CGT Rules?

The answer will depend heavily on the investment.

Some investors may benefit from the move towards indexation, particularly where an asset has been held for a long time and its growth has been relatively modest.

Potential beneficiaries could include investors with:

• Long-term investments with low or moderate growth
• Assets where inflation represents a significant portion of the nominal gain
• Certain long-term property investments
• Investments where the indexed cost base substantially reduces the real capital gain

The important point is that there is no universal winner.

The tax outcome will depend on the asset and the investor’s circumstances.

Who Could Be Worse Off?

Investors holding rapidly appreciating assets could face a different result.

This may include:

• High-growth investment properties
• Shares that have experienced substantial appreciation
• Successful privately owned businesses
• Certain speculative investments
• Other assets where the capital gain significantly exceeds inflation

As John and Leigh discuss, this creates a planning challenge.

Under the existing 50% discount, investors have a relatively straightforward framework for estimating the taxable capital gain.

Under an indexation-based system, inflation becomes an important part of the calculation.

That makes future tax outcomes less straightforward.

What Does the 30% Minimum Tax Mean?

The Government also plans to introduce a minimum 30% tax rate on real capital gains from 1 July 2027.

The minimum tax is intended to apply after the inflation adjustment has been taken into account.

The Government says the measure is designed to reduce incentives to defer capital gains and better align the taxation of capital gains with the tax rates paid on other forms of income.

For investors, this means the headline capital gain is not the only number that matters.

The calculation needs to consider:

1. The original cost base.
2. The investment’s growth.
3. Inflation adjustments.
4. The amount of the real capital gain.
5. The applicable tax treatment.
6. The investor’s broader tax position.

This is why investors should avoid making decisions based solely on the headline change from “50% discount” to “30% minimum tax”.

What Happens to Existing Investments?

One of the most important aspects of the reforms is that the changes are intended to be prospective rather than simply applying the new system retrospectively.

The Government has stated that capital gains accruing before 1 July 2027 will retain access to the existing 50% discount, while gains accruing from 1 July 2027 will be subject to the new arrangements.

This distinction is particularly important for investors who already own property, shares or other CGT assets.

It means investors should not automatically assume that an existing asset will suddenly lose the benefit of the existing rules on its entire historical gain.

However, determining exactly how the transition applies can be complex.

What About New-Build Property?

There is also a specific concession for investors purchasing eligible new-build property.

Investors in new builds will be able to choose between the existing 50% CGT discount and the new indexation and minimum-tax arrangements when they eventually sell the property.

This is particularly relevant because the Government says the measure is intended to encourage investment in new housing supply.

For investors considering a new property, the choice of CGT treatment could become an important part of the long-term investment analysis.

The best option will depend on factors such as:

• Purchase price
• Expected capital growth
• Holding period
• Inflation
• Financing costs
• Rental income
• Ownership structure
• Future tax position

How Could the Changes Affect Investment Decisions?

Tax should never be the only reason to buy or sell an investment.

However, changes to CGT can affect the after-tax return an investor ultimately receives.

For example, an investor considering two otherwise similar assets may need to look beyond their expected sale price and consider how much of the gain could ultimately be subject to tax.

This is particularly important for people investing over 10, 20 or 30 years.

A small difference in the tax treatment of a substantial capital gain can become significant over time.

Should Investors Sell Before the Changes?

This is one of the biggest questions investors may have.

The answer is not automatically yes.

Selling an asset purely because the tax rules are changing can create other consequences, including:

• Immediate CGT
• Selling costs
• Stamp duty on a replacement asset
• Loss of future investment income
• Changes to borrowing arrangements
• Changes to diversification
• Potentially missing future capital growth

The right decision depends on the individual investment and the investor’s broader financial position.

Tax considerations should form part of the decision — not necessarily determine the entire decision.

What Should Australian Investors Do Now?

With the new CGT arrangements scheduled to apply from 1 July 2027, investors have an opportunity to review their position before the changes take effect.

Consider:

• Reviewing your existing investment portfolio.
• Understanding the cost base of major assets.
• Identifying assets with significant unrealised capital gains.
• Reviewing your investment ownership structure.
• Considering whether planned asset sales should be brought forward or delayed.
• Understanding how the new indexation rules could affect long-term investments.
• Reviewing proposed new-build property investments.
• Considering the potential tax consequences before restructuring.
• Keeping detailed records for future CGT calculations.

Most importantly, do not make a major investment decision simply because a new tax rule has been announced.

Why Professional Tax Advice Matters

The biggest takeaway from John Saade and Leigh Morris is that the new CGT system may make long-term planning more complicated.

The old 50% discount was relatively simple to understand.

The proposed system introduces inflation, a minimum tax rate, and different treatment for certain investments, including eligible new builds.

That means the question is no longer simply:

“How much capital gain will I make?”

Investors may also need to ask:

“How much of that gain will be a real gain after inflation, and how will it be taxed when I eventually sell?”

Understanding the difference could make a significant difference to long-term investment decisions.

Capital Gains Tax Changes: What Investors Should Remember

The proposed 2026 CGT reforms represent a major change to how capital gains may be taxed in Australia.

The key points are:

• The existing 50% CGT discount is proposed to change from 1 July 2027.
• Indexation will be used to account for inflation under the new system.
• A minimum 30% tax rate will apply to real capital gains under the proposed arrangements.
• Existing investments will receive prospective treatment for gains accruing before and after 1 July 2027.
• Eligible new-build investors will have a choice of CGT treatment.
• The outcome can vary significantly between different investments.
• Investors should consider their individual circumstances before making decisions.

The changes may create opportunities for some investors while increasing the tax burden or uncertainty for others.

Understanding the rules before making an investment decision is therefore more important than ever.

Frequently Asked Questions About Capital Gains Tax Changes in 2026

Is the 50% CGT discount being removed?

The Government has announced that the existing 50% CGT discount will be replaced by an inflation-based discount for gains accruing from 1 July 2027, subject to the proposed rules and exemptions.

When do the new CGT rules start?

The proposed new CGT arrangements apply to capital gains accruing from 1 July 2027. Gains accruing before that date retain the existing 50% discount treatment under the announced transitional arrangements.

What is CGT indexation?

CGT indexation adjusts the cost base of an asset for inflation, with the intention of taxing the real capital gain rather than the full nominal increase in value.

Will every investor pay 30% capital gains tax?

The proposed system introduces a minimum 30% tax rate on real capital gains. The exact tax outcome will depend on the investor, asset, ownership structure and applicable rules.

Should I sell my investment before 1 July 2027?

Not necessarily. Selling an asset purely to access the current CGT discount may create other tax, investment and transaction costs. Investors should assess their individual circumstances before making a decision.

Are new-build properties treated differently?

Yes. Under the announced reforms, investors in eligible new builds can choose between the existing 50% CGT discount and the new indexation-based arrangements.

Talk to Latitude Accountants

Capital Gains Tax can significantly affect the after-tax return from an investment. With major changes proposed from 1 July 2027, now is a good time to understand how the reforms could affect your investment and tax position.

Latitude Accountants provides proactive tax, accounting and advisory services to individuals, investors and businesses across Australia.

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📧 info@latitudeaccountants.com.au

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Disclaimer

This article is general information only and does not constitute financial, legal, tax, mortgage, superannuation, investment or business advice. Tax legislation and proposed reforms can change, and the application of the CGT rules depends on individual circumstances. Speak with a qualified adviser before making financial, investment, tax or business decisions.