The 50% CGT discount vs indexation: the numbers behind the 2026 reform

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 introduce cost base indexation and a 30% minimum tax on eligible real gains from 1 July 2027, replacing the flat 50% discount for affected gains. Both Acts passed Parliament on 25 June 2026 and received royal assent the following day.

The reform applies broadly to eligible gains made directly by individuals or attributed through trusts and partnerships on assets held for at least 12 months. The minimum tax is imposed at the Australian-resident individual level, including relevant gains attributed through trusts. It does not affect the 2026 tax return. Gains that accrue before 1 July 2027 keep the existing 50% discount, and only the portion of a gain accruing after that date is taxed under the new rules.

The benefit is also heavily concentrated. In 2022-23, the most recent year with detailed data, around 830,000 people were affected by the discount and more than 1.1 million individual tax filers realised a net capital gain. Of those filers, 71% benefited from the discount.

The distribution of the discount also differs by gender and age. In 2022-23, around 420,000 men and 410,000 women used the discount, with men receiving 58% of the benefit and women 42%. By age, the single largest share of the benefit, 20%, went to people aged 60 to 64, with a small number of individuals receiving a particularly large share of the benefit.

Over the five years from 2025-26, the combined negative gearing and CGT reform package is projected to raise $3.6 billion in additional receipts, helping to fund other measures in the same Budget, including a new $250 Working Australians Tax Offset from 2027-28. The Budget does not separately identify the CGT component of that total. Non-zero effects begin in 2026-27 but round to zero at this level of precision, and material receipts first appear from 2028-29.

In this example, the asset is worth $1,131,371 at 1 July 2027. The pre-reform gain of $331,371 is reduced by the 50% discount to a taxable amount of $165,685. The post-reform gain of $468,629 is reduced by indexation to $319,958. The combined taxable gain of $485,643 is $85,643 more than the $400,000 that would have applied had the 50% discount covered the whole period. At a 47% tax rate, that is $228,252 in tax under the new rules, against $188,000 under the old rules, a difference of $40,252.

For comparison, a shorter two-year example uses an investor already owning a property before the reform, worth $500,000 at 1 July 2027 and sold for $560,000 two years later. Assuming annual inflation of 2.5%, it produces a post-reform taxable gain of $34,688 under indexation, against $30,000 under the 50% discount.

This is an official Budget example. Calculation: $560,000 − ($500,000 × 1.025²) = $34,688, rounded to the nearest dollar.

Source: Budget 2026-27, tax explainer, negative gearing and capital gains tax reform.

A five-year share example, bought for $100 after the reform starts and sold for $125, a 4.6% annual return, produces a taxable gain of $12 under indexation, only slightly less than the approximately $13 that would apply under the 50% discount. The official example assumes annual inflation of 2.5%. This points to the same conclusion as the ten-year asset examples in the previous section, where the gap between the two methods varies depending on the return achieved. Holding period on its own does not decide the outcome: the return achieved, inflation and the length of the holding period all interact.

In Treasury's historical analysis, inflation represented between 36% and 59% of nominal growth across the five-year and ten-year examples shown above. Houses held for ten years were at the low end, meaning a larger proportion of their nominal growth was a real gain. Units held for five years were at the high end, meaning a larger proportion of their nominal growth reflected inflation. Budget Paper No. 1 also publishes inflation-share estimates for two-year and 20-year holding periods, but the calculated tax-rate table above is limited to five-year and ten-year periods.

An individual with $25,000 of other taxable income who realises a $10,000 capital gain on an asset bought after the reform starts, and who does not receive an income support payment, pays ordinary tax of $1,400 on that gain, a rate of 14% excluding the Medicare levy. Because 14% is below the 30% floor, an additional $1,600 becomes payable, bringing the total tax on the gain up to 30%. Tax offsets may reduce this amount further.

Recipients of a wide range of income support payments are exempt from the minimum tax for any year in which they receive a payment. Their post-reform gains are still calculated using indexation rather than the 50% discount, but the 30% minimum-tax floor does not apply.