Australia’s 2026-27 capital gains tax reforms and their economic impacts
Consensus Summary
Australia’s federal government has announced significant reforms to capital gains tax (CGT) aimed at reducing tax advantages for high-income earners and shifting investment away from existing property toward shares and new housing. The 50% CGT discount for assets held over 12 months will be replaced with inflation-adjusted indexation from July 1, 2027, with a minimum 30% tax rate on capital gains applying from July 1, 2028. The reforms are expected to raise $3.6 billion over five years and target intergenerational housing inequality, as the current discount has disproportionately benefited the top 10% of taxpayers. While the principal place of residence remains exempt, investors in new home builds will retain the 50% discount, and small business CGT concessions will remain unchanged. The government also introduced permanent measures to support small businesses, including instant asset write-offs and loss carry-back schemes. Both sources agree the changes will increase compliance complexity, particularly for assets like property, and may encourage investors to diversify away from real estate. However, concerns remain about the impact on startups and high-growth investors, with the government committing to further consultation on these sectors.
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Key details reported by multiple sources:
- The 50% capital gains tax discount for assets held over 12 months will be replaced with inflation-adjusted indexation from July 1, 2027, with a minimum 30% tax rate on capital gains applying from July 1, 2028.
- The reforms are expected to raise an additional $3.6 billion over the next five years, according to the Australian government.
- The principal place of residence (PPOR) remains exempt from capital gains tax under the reforms.
- Investors in new home builds will retain the option to use the 50% CGT discount when selling, while subsequent purchasers of new builds will not be eligible for the discount or negative gearing.
- The government will consult on the interaction of the CGT reforms with incentives for investment in early-stage and start-up businesses, acknowledging the sector’s unique characteristics.
- The current 60% CGT discount for qualifying affordable housing will be fully retained.
- The four small business CGT concessions will remain unchanged under the reforms.
- The budget includes measures to make the instant asset write-off and loss carry-back permanent for small businesses, reducing compliance costs by around $32 million annually.
- The reforms aim to shift investment away from existing property and toward shares and new property, improving the efficiency of investment decisions by reducing tax-driven behavior.
- The government estimates that 83% of the benefit of the current CGT discount goes to the top 10% of taxpayers by income.
Points of Difference
Details reported by only one source:
- Treasurer Jim Chalmers stated in the budget speech that the reforms aim to 'level the playing field for workers and first home buyers, and support investment in productive assets, including new housing supply.'
- The article provides a detailed case study of Jane, who buys an investment property in 2022 for $800,000 and sells it in 2032 for $1.6 million, illustrating how the new tax system would increase her taxable gain by $40,252 compared to the old system.
- The article includes a case study of David, Ben, and Kate, who each purchase a home in 2027 for $500,000 and sell it after 10 years, showing how the new indexation system would result in varying tax outcomes based on their annual returns (5%, 7.5%, and 2.5% respectively).
- The article notes that 1.1 million individual tax filers realized a net capital gain in 2022-23, with around 830,000 using the CGT discount, including 420,000 men and 410,000 women.
- Professor Andrew Conway of the Institute of Public Accountants warned that the transitional arrangement will add complexity and compliance costs, particularly for assets without transparent values.
- The article highlights that house prices have increased by over 400% since the introduction of the 50% CGT discount in 1999, while the home ownership rate among 25- to 34-year-olds declined by 7 percentage points between 2001 and 2021.
- The share of Australians owning shares outside of super has declined by almost 20 percentage points since the discount was introduced.
- The article includes a quote from private investor Liam Walsh, who holds $3 million in high-growth shares and supports the CGT changes despite expecting a financial hit, stating, 'I'm looking for some tissues to cry into because nearly all of my income that I derive comes from capital growth.'
- The article notes that inflation accounted for 56% of asset price growth for ASX 200 shares held for 10 years to March 2026, and 53% for the broader All Ordinaries index, while inflation accounted for only 38% of asset price growth for all property.
- Devika Shivadekar, economist at RSM Australia, stated that the CGT changes will likely incentivize people to think about other methods of wealth building outside of property, describing Australians' obsession with property portfolios as creating inequity between the 'haves' and the 'hopefuls.'
- Jacki Neumann, head of capital markets at Sharesies, described the changes as signaling 'a structural transition in how Australians are incentivized to build wealth,' shifting focus from tax advantages to market-driven returns.
- UBS equity strategist Richard Schellbach agreed that the CGT changes, combined with the winding back of negative gearing, could see stocks 'improve their relative appeal' compared to property investments, particularly income stocks over growth stocks.
- The article highlights concerns from high-profile investors that scrapping the 50% CGT discount could hurt startups, which often use employee share schemes to attract talent.
Contradictions
Conflicting information between sources:
- Newscomau states that the 50% CGT discount will apply to the difference between the asset’s cost base and its value at July 1, 2027, while ABC does not provide specific details on how the transitional valuation will be calculated for assets like property.
- Newscomau describes the reforms as 'once-in-a-generation overhaul' to capital gains tax, while ABC frames it as a return to the pre-1999 indexation system, implying less radical change.
Source Articles
‘Everyone pays a fair share’: How capital gains tax change will work
Labor is axing the 50 per cent CGT discount in a massive tax shake-up. Here’s what you need to know — and who’s paying more.
CGT changes could see investment shift to shares, budget suggests
Investors in stocks will be affected by changes to capital gains tax, but experts say the budget is still likely to see some investment move away from property and into shares.