How the new CGT rules could work (a simple example)

13/5/2026

How the new CGT rules could work (a simple example)

Rather than getting lost in the technical detail, it’s easier to walk through a real-world example.

Let’s say:

John buys an investment property for $500,000
By 1 July 2027, it’s worth $800,000
He sells it in 2032 for $1,000,000

Under the current system (today), if nothing changed:

Total gain = $1,000,000 – $500,000 = $500,000
50% discount applies
Taxable gain = $250,000

Simple.

Under the proposed new system, the gain gets split into two parts:

🟦 Part 1: Before 1 July 2027 (old rules still apply)

Gain = $800,000 – $500,000 = $300,000
50% discount still applies
Taxable gain = $150,000

👉 No change here.

🟩 Part 2: After 1 July 2027 (new rules apply)

Gain = $1,000,000 – $800,000 = $200,000

Instead of a 50% discount:

The $800,000 cost base is adjusted for inflation (CPI)
Only the “real gain” above inflation is taxed, so adjusted for inflation → say ~$95,000 real gain

👉 Then a minimum 30% tax rate may apply to this portion

Source: Budget 2026-27 Fact Sheet – Negative Gearing and Capital Gains Tax Reform. Figures are simplified to illustrate how the proposed rules may work. Actual outcomes will vary.

📊 What does this mean in dollars?

The new rules may reduce the benefit of selling assets in a low-income year—a strategy that has traditionally worked well for retirees.

The impact becomes clearer when you compare different income levels.

🧠 What this means in practice

The old system rewards time held (via the 50% discount)

The new system focuses on “real gains” (after inflation)

So depending on:

how long you hold the asset, and
what inflation looks like

👉 you could pay more, or sometimes less, tax than today

⚠️ One important catch

Even if your income is low in the year you sell:

👉 A minimum 30% tax rate may apply to gains after July 2027
(Unless you’re receiving certain income support payments, like the Age Pension)

🧾 A quick second example (why the minimum tax matters)

Let’s say:

You have low income in a given year, say $25,000.
You make a $10,000 capital gain

Under today’s rules:
👉 You might only pay around $1,400 in tax

Under the new rules:
👉 That could be lifted to as much as $3,000 (30%)

Source: Budget 2026-27 Fact Sheet – Negative Gearing and Capital Gains Tax Reform

💬 The key takeaway

This isn’t about rushing out and making changes.

But it does mean:

👉 The way investments are taxed is becoming more complex—and more important to plan properly, particularly if you:

hold property
have a long-term investment portfolio
are thinking about when to sell assets

🧭 My view

This is a classic example of why:

👉 tax should never drive the decision—but it absolutely needs to be considered.

The focus should always be:

getting the right investment
for the right reason
aligned to your long-term plan

Then structuring it as efficiently as possible.

IMPORTANT: This article is general in nature and is intended to provide a high-level overview of recent Federal Budget announcements. It doesn’t take into account your personal situation, objectives or needs. Before acting on anything discussed, it’s important to consider how it applies to your circumstances and whether it’s appropriate for you.

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