Planning for Australia’s Capital Gains Tax (CGT) changes

The Federal Budget introduced a significant shift in how capital gains will be taxed in Australia. While the legislation has passed Parliament, the changes do not take effect until 1 July 2027. 

What is changing? 

The current 50% CGT discount will be replaced for individuals, trusts and partnerships, with cost base indexation and a 30% minimum tax rate for capital gains accruing after 30 June 2027.  

For many investors, this represents a significant change in the way capital gains are currently taxed, particularly for those who have employed long-term strategies around holding assets through their growth phase and gradually selling down later in life.

Gains accrued up to 30 June 2027 may continue to receive concessional treatment under proposed grandfathering arrangements, while gains accruing after that date will fall within the new regime. That split makes valuation and record keeping critical.

Why valuations matter? 

For existing investors, the opportunity is in protecting the value of any grandfathered position. This will require more than knowing when an asset was acquired.

Investors may need robust valuations at the relevant date, clear records of cost base adjustments and a practical understanding of how any future gain will be apportioned between the old and new rules.

This is particularly important for assets that have appreciated significantly over time. Without appropriate valuation support, investors may find it more difficult to substantiate the grandfathered component of a future gain.

Pre-CGT assets will also need careful attention. Under the new rules these assets are treated as having a tax-exempt deemed sale and reacquisition at market value. In practical terms, the historical capital gain up to 30 June 2027 would be grandfathered and exempt, while future capital growth may be subject to the new tax treatment. 

For families, business owners and investors with legacy assets, valuations on 30 June 2027 may be critical to protecting the exempt portion of any future gain. 

Who is likely to be most affected? 

Companies and superannuation funds are not currently within the scope of the CGT changes. Furthermore, investors receiving income support payments may also be exempt from the proposed 30% minimum tax rate.

This means the changes are likely to have the greatest impact on individuals, families and trust structures, particularly those that have built up extensive business and asset portfolios over time.

Any existing assets with unrealised gains may still benefit from grandfathering, with discounts protected on market values up to 30 June 2027. Investors in new residential builds may also still be able to utilise the 50% CGT discount method when they dispose of those assets, as a targeted exemption to the changes.

The changes may also have an unintended impact on investor risk appetite. Higher-risk companies, including start-ups and exploration companies, may become less attractive to investors where the after-tax reward is significantly reduced under a no-discount and minimum 30% tax regime. 

What should investors and business owners do now?

The first step is to speak with your trusted tax adviser. Investors and business owners, in consultation with their advisers, should identify potentially impacted assets, gather supporting documentation and consider whether formal valuations may be required. Importantly, as business valuations can often be subjective, they should always be performed by a qualified professional. This will reduce the risk of an adverse tax outcome, in the event of a Tax Office review.

Planning ahead  

The CGT changes are likely to make timing, sale structure (asset versus entity) and documentation more important for investors and business owners.  The key is to get the right advice so you can understand your position early. This will help ensure that you maximise your net after tax outcome from any sale.

Similarly, for those looking to acquire assets, make sure you have had the right discussions with your adviser and put the right structures in place before you commit to any transaction.

If you would like to better understand how these CGT changes could affect you, your investments and business interests, please contact Chris Roos or your local adviser.