Labour's overhaul of the capital gains tax (CGT) discount stands as one of the most significant measures in the recent budget, yet it remains one of the most intricate to understand.
Understanding the CGT Changes
CGT is levied when an asset is sold, but since 1999, owners have benefited from a CGT discount. Under the new rules, effective from 1 July 2027, this discount will be replaced by a novel cost-base indexation system. It is crucial to note that the main residence, or family home, continues to be exempt from CGT under the revised framework.
How Much Tax Will Investors Pay?
The tax liability under the new system compared with the old one depends on various factors. To illustrate, consider Jan, a hypothetical property investor. We compare the two policies in her case, and you can explore the numbers using our interactive calculator below.
This example demonstrates how the current and new systems contrast. The outcome shifts with changes in asset price growth, inflation, and other parameters. Our calculator allows you to examine differences between the two schemes, but note that it compares an asset wholly under one scheme or the other. In practice, if you acquired an asset before 1 July 2027 and sold it afterwards, you would need to apply both old and new rules.
- Current system: CGT discount reduces taxable gain by 50% for assets held over 12 months.
- New system: Indexation adjusts the cost base for inflation, eliminating the discount.
- Main residence exemption remains unchanged.
Explore more on these topics: Australian budget 2026, The Crunch, Tax, Business, Australian economy.
