CGT reform is law: What to review before 1 July 2027

Australia’s capital gains tax rules are changing from 1 July 2027. The long-standing 50% CGT discount will be replaced for relevant future gains with cost-base indexation for inflation and a 30% minimum tax rate on real capital gains.

What is changing?

Under the current rules, Australian resident individuals and trusts can generally reduce an eligible capital gain by 50% when an asset has been held for at least 12 months. From 1 July 2027, the 50% discount will be replaced by inflation-based cost-base indexation for relevant gains, together with a minimum 30% tax rate on real capital gains.

Importantly, this does not mean every capital gain will simply be taxed at a flat 30%. The minimum-tax mechanism is designed to ensure real capital gains are taxed at no less than 30% where the taxpayer’s ordinary tax outcome would otherwise be lower.

For assets already held at 30 June 2027, transition rules generally separate the gain that accrued before 1 July 2027 from the gain that accrues afterwards. The detail can be complex, so valuations and records may become more important.

Business owners: revisit exit and succession plans

If you expect to sell a business, bring in new owners or transfer value to the next generation within the next few years, the reform may affect both timing and after-tax proceeds.

That does not automatically mean a transaction should be brought forward. It does mean the numbers should be modelled under both the current and post-1 July 2027 rules before major decisions are locked in.

The small business CGT concessions remain important. The Government has also legislated an increase in the turnover threshold for the 50% active asset reduction from $2 million to $10 million from 1 July 2027, subject to the relevant eligibility requirements.

Trusts and family groups: check whether the structure still fits

Family trusts are often used for investment, asset protection and succession. With CGT reform commencing in 2027 and separate changes to discretionary trust taxation commencing later, now is a sensible time to review whether existing structures still support the family’s long-term objectives.

Useful questions include:

• Which assets are likely to be sold or transferred in the next few years?
• Is the current ownership structure still commercially appropriate?
• Does the structure support the intended succession or estate plan?
• Are there unrealised gains that should be identified and documented now?

Investors: model the outcome, do not react to the headline

Tax should be one input into an investment decision, not the only one. Some investors may pay more tax under the new model, while others may benefit from indexation where asset growth is closer to inflation.

A practical review should focus on unrealised gains, expected holding periods and the likely tax position under both systems.

Record keeping will matter more

The transition rules create a natural dividing line at 1 July 2027. For privately held businesses, property and other assets, good records and supportable valuations may be critical when working out how much of a future gain relates to the old rules and how much relates to the new rules.

What should you review before 1 July 2027?

• Unrealised gains across investments and business assets.
• Any business sale, restructure or succession likely within the next five years.
• Trust and ownership structures.
• Eligibility for the small business CGT concessions.
• Asset cost-base records and whether valuations may be required.
• The estimated after-tax result under the current and new CGT rules.

The bottom line

The new rules do not start until 1 July 2027, but the useful planning window is before that date. For business owners, investors and family groups with material unrealised gains, early modelling can help preserve flexibility and avoid rushed decisions later.

DisclaimerThis article provides general information only and does not constitute tax, legal or financial advice. The CGT reforms contain detailed eligibility, transition and calculation rules. Advice should be obtained for your specific circumstances before acting.