# The 50% CGT discount ends for gains from 1 July 2027: what the capital gains tax changes mean for landlords

> The capital gains tax changes are law: from 1 July 2027, indexation and a 30% minimum tax replace the 50% discount on new gains. What it means for landlords.

- Published: 24 September 2026
- Section: Investing
- Author: Landlord Weekly Editorial Team
- URL: https://www.landlordweekly.com/articles/cgt-changes-landlords-2026

The capital gains tax changes from the 2026-27 Budget are law. From 1 July 2027, the 50% CGT discount is replaced by cost base indexation and a 30% minimum tax for most assets held by individuals, trusts and partnerships, including rental properties. Only gains that build up from that date are affected. Gains that built up before it keep the 50% discount whenever you sell, and new builds keep a choice of either method.

**Key takeaways**

- The 50% CGT discount is replaced for gains accruing from 1 July 2027 by indexation to inflation, plus a 30% minimum tax on those real gains.
- Gains up to 1 July 2027 keep the 50% discount. You split the gain using a valuation or a formula when you sell.
- The CGT change applies to properties grandfathered from the negative gearing change too.
- Whether you pay more or less depends on how fast your property grows compared with inflation.
- Investors in eligible new builds can choose the old 50% discount or the new method. Their buyers can't.

**50% to indexation**: How capital gains on rental property are discounted, for gains accruing from 1 July 2027

## What is the CGT discount?

The CGT discount lets individuals, trusts and partnerships pay tax on only half of a capital gain when they sell an asset, such as a rental property, they have held for at least 12 months. From 1 July 2027 it is replaced by cost base indexation and a 30% minimum tax, but gains that built up before that date keep the 50% discount, and investors in eligible new builds can still choose it.

## What the CGT changes are, and their status

The Treasurer announced the reform in the Budget on 12 May 2026. According to [Budget Paper No. 2](https://budget.gov.au/content/bp2/download/bp2_2026-27.pdf) and the Budget [tax explainer](https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf), from 1 July 2027:

- the 50% CGT discount is replaced by cost base indexation for assets held for at least 12 months, calculated using the Consumer Price Index in a similar way to the arrangements that applied from 1985 to 1999
- a minimum tax rate of 30% applies to real capital gains accruing from 1 July 2027
- the changes apply to all CGT assets, including property and shares, held by individuals, partnerships and trusts, and to assets bought before 1985 (for gains after 1 July 2027 only).

The measure is in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. The [Parliament's bill record](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7493) shows it passed both houses on 25 June 2026 and received Royal Assent on 26 June 2026. The [ATO](https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/tax-reform-boosting-home-ownership-reforming-negative-gearing-and-capital-gains-tax) describes it as law.

The same Act limits negative gearing to new builds for established homes bought from 7:30pm AEST on 12 May 2026. We cover that in detail in our [negative gearing changes explainer](https://www.landlordweekly.com/articles/negative-gearing-changes-2026).

**Still being finalised, as at 24 September 2026**

The core CGT rules are law. Some pieces aren't yet. The apportionment formula for splitting a gain at 1 July 2027 is in a draft legislative instrument, and the definition of a "new residential dwelling" (which decides who keeps the 50% discount option) is in draft tranche 2 legislation. [Treasury consultation](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/consultation-next-tranche-tax-reform-legislation) on both closed on 21 August 2026. The Government has also said further tranches will deal with CGT rollovers, foreign and temporary residents and other special cases.

## How the new CGT method works

### Indexation instead of a flat discount

Under the old rules, you took the nominal gain (sale price less cost base) and, if you held the asset for at least 12 months, halved it. Under the new rules, the cost base is increased by inflation over the time you hold the asset, and only the gain above that is taxed. Treasury's argument is that a flat 50% discount over-compensates some investors and under-compensates others, because inflation is rarely exactly half of a gain.

In practice, the outcome now depends on your property's growth rate compared with inflation. Treasury's own analysis, using average returns over the past 20 years, shows indexation would have been worth less than the 50% discount for houses, and as much or more for units and shares.

**Effective CGT discount from indexation vs the 50% discount, average over past 20 years**

| Asset and holding period | Discount from indexation | Old flat discount |
| --- | --- | --- |
| House, 5 years | 42 | 50 |
| House, 10 years | 36 | 50 |
| Unit, 5 years | 59 | 50 |
| Unit, 10 years | 50 | 50 |
| ASX 200 shares, 5 years | 53 | 50 |
| ASX 200 shares, 10 years | 56 | 50 |

Treasury's figures are based on average capital growth of 5.8 to 6.1% a year for houses and 4.1 to 4.8% for units. In plain terms: the faster your property grows above inflation, the more tax you pay compared with the old system. A property that only keeps pace with inflation would have no taxable real gain at all.

### The 30% minimum tax

The minimum tax is a floor, not a flat rate. It only bites when the tax you'd otherwise pay on a post-1 July 2027 real gain works out at less than 30%. For most working landlords on the 30% bracket or above (plus Medicare levy), it changes nothing.

It matters for people who planned to sell in a low-income year, such as the first year of retirement. The explainer's example: a person with $25,000 of other income realises a $10,000 gain, pays $1,400 of ordinary tax on it (14%), and then pays another $1,600 to bring the rate up to 30%. Under the Act as passed, anyone who receives certain government payments at any time in the income year of the gain is exempt. The list includes the Age Pension, JobSeeker, the Disability Support Pension, Carer Payment, Youth Allowance, family tax benefit, parental leave pay and some veterans' pensions.

The minimum tax doesn't apply to the part of the gain that built up before 1 July 2027.

### What stays the same

According to the explainer and the [explanatory memorandum](https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r7493_ems_a90ad43e-17d7-4cd3-859b-84ac4e6f3dea/upload_pdf/JC018386.pdf;fileType=application%2Fpdf):

- the main residence exemption is unchanged
- the four small business CGT concessions remain
- the 60% discount for qualifying affordable housing is retained
- companies, which never had the discount, and complying super funds are generally outside the new indexation regime.

## The transition rules if you already own

Every investment property held before 1 July 2027 is split into two periods when you sell.

1. **The gain up to 1 July 2027** is taxed under the old rules, with the 50% discount if you've held the property for at least 12 months.
2. **The gain from 1 July 2027** is taxed under the new rules, using the property's 1 July 2027 value as its cost base, indexed for inflation from that date, with the minimum tax as a floor.

Technically, the Act treats the property as sold just before 1 July 2027 and bought back on that date, but you pay nothing until you actually sell.

You work out the 1 July 2027 value in the year you sell. The explainer says you can either get a valuation as at 1 July 2027, or use an apportionment formula that estimates the value from the asset's growth over the whole holding period. The draft formula assumes an even growth rate over the whole holding period. The Government says the ATO will provide tools.

This applies whether or not your property is grandfathered from the negative gearing change. Grandfathering protects your ability to deduct rental losses against other income. It doesn't protect the post-2027 part of your capital gain from the new CGT method. If your property is a qualifying new build, you can choose the old 50% discount instead.

## Worked example: a property bought in 2016, sold in 2032

This example is **illustrative only**. It uses round numbers, assumes inflation of 2.5% a year (as Treasury's own examples do), ignores selling costs and other cost base items, and applies a 47% rate (the top 45% rate plus the Medicare levy) to the whole taxable gain.

Alex bought a house in 2016 for $500,000. It is worth $800,000 on 1 July 2027. Alex sells on 1 July 2032.

**Pre-1 July 2027 part (either scenario):** $800,000 less $500,000 is a $300,000 gain. With the 50% discount, $150,000 is taxable.

**Post-1 July 2027 part:** the $800,000 value is indexed by five years of 2.5% inflation to about $905,126. Only the gain above that is taxable.

| | Sells for $950,000 (slower growth) | Sells for $1,100,000 (faster growth) |
| --- | --- | --- |
| Total nominal gain | $450,000 | $600,000 |
| Old rules: taxable gain (50%) | $225,000 | $300,000 |
| New rules: pre-2027 part | $150,000 | $150,000 |
| New rules: post-2027 real gain | $44,874 | $194,874 |
| New rules: total taxable gain | $194,874 | $344,874 |
| Tax at 47%, old rules | $105,750 | $141,000 |
| Tax at 47%, new rules | $91,591 | $162,091 |
| Difference | About $14,160 less | About $21,090 more |

With slower growth after 2027 (about 3.5% a year), Alex pays less tax than under the old rules. With faster growth (about 6.6% a year), Alex pays more. The minimum tax doesn't bite here because Alex's rate is already above 30%. It's the same pattern as the Government's own examples, in which a $500,000 asset bought in July 2027 and held for 10 years produces $8,075 more tax at a 5% annual return, $24,858 less at 2.5%, and $58,851 more at 7.5%.

### How quarantined rental losses fit in

If you bought an established home from 7:30pm AEST on 12 May 2026, the negative gearing change means your rental losses from 1 July 2027 are quarantined and carried forward. The sale is often where they get used. Under the new method statement in the Act, quarantined amounts reduce your residential capital gains after capital losses and before any discount.

Illustrative: Priya buys an established unit in August 2026 for $600,000. It's worth $610,000 on 1 July 2027 and she sells on 1 July 2032 for $760,000, having built up $75,000 of quarantined rental losses (five years at $15,000, as in the example in our negative gearing explainer). Her pre-2027 gain is $10,000. Her post-2027 real gain is $760,000 less about $690,159 (the indexed $610,000), or about $69,841. The quarantined amounts wipe out the $10,000 first, then reduce the $69,841 to about $4,841. That's her taxable gain. The losses weren't lost, but she waited years to use them.

## The hold or sell decision

Treasury designed the transition so there's no tax reason to rush. The explainer says only gains after commencement are affected, "meaning there is no incentive to buy or sell assets before this date". These are the questions we'd work through.

**Is the reason to sell a tax reason or a property reason?** Selling before 1 July 2027 locks in the old rules on the whole gain, but the pre-2027 gain keeps the 50% discount anyway. What an early sale really buys you is avoiding the new method on future growth, which you'd also be giving up. Agent fees and, if you buy again, stamp duty are real and immediate.

**Is the property grandfathered for negative gearing?** If you held it at 7:30pm AEST on 12 May 2026, selling ends that status for good. Buy an established replacement and its losses are quarantined from 1 July 2027. If your property is negatively geared and you plan to stay invested, that's a large cost to weigh against any CGT benefit.

**What growth do you expect relative to inflation?** Indexation favours slow growth and penalises fast growth, compared with the old 50% discount. Nobody knows future growth, so don't overweight this, but a property you expect to barely beat inflation is worth less to sell for tax reasons than one expected to boom.

**When will you sell, and what else will your income be?** The 30% floor removes most of the benefit of timing a post-2027 gain into a low-income year, unless you receive one of the exempt government payments in that year. The pre-2027 portion isn't affected by the floor.

**Are you still buying and selling within the old rules?** A property bought and sold before 1 July 2027 is taxed entirely under the current rules, according to the explainer.

## New build or established for your next purchase

The tax gap between new and established homes is now wide.

| | Eligible new build | Established home bought from 7:30pm AEST on 12 May 2026 |
| --- | --- | --- |
| Rental losses | Deductible against salary and other income | From 1 July 2027, only against residential property income and gains, rest carried forward |
| CGT on sale | Choice of 50% discount or indexation with minimum tax | Indexation with 30% minimum tax (pre-2027 gain, if any, keeps 50%) |
| Next buyer | Gets neither concession for that property | Same rules as you |

The tax treatment favours new builds, which is the policy intent. Keep the other side in view. You're relying on a definition that's still in draft: the Government's [4 August 2026 release](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/consultation-next-tranche-tax-reform-legislation) proposes that a dwelling counts as new if it adds to supply and is bought within 24 months of a certificate of occupancy. New builds can carry a price premium, off-the-plan purchases carry construction and valuation risk, and because your eventual buyer won't get the concessions, investor demand for your property on resale may be thinner. Weigh the location, the build and the numbers before the tax.

## Ownership structures to discuss with your adviser

The changes reach into how property is owned, so talk to your adviser before you buy or restructure. In general terms:

- **Individuals, trusts and partnerships** are covered by the new CGT method. Companies and complying super funds are generally outside it.
- **Transfers can reset the clock.** Moving a property to a spouse, trust or company is generally a CGT event for the person transferring it, and the negative gearing grandfathering applies to a dwelling you last acquired before Budget night. The tranche 2 draft proposes keeping eligibility for dwellings acquired from a spouse through inheritance or relationship breakdown, but that isn't law as at 24 September 2026.
- **Discretionary trusts.** The Budget also announced a 30% minimum tax on discretionary trust income from 1 July 2028. That measure was not part of the Act passed in June, so check its status before relying on it.
- **Super.** Complying super funds, including SMSFs, are excluded from the negative gearing quarantine. SMSF property has its own strict borrowing and investment rules, and the same Act limits new SMSF limited recourse borrowing for real property to business real property, for arrangements entered into from 10 August 2026. Existing arrangements, and refinancing of them, are not affected.

None of this is a recommendation to use any structure. Get advice from a registered tax agent or licensed adviser on your circumstances.

## Record keeping for your cost base

Good records were always important for CGT. They now also need to support a split at 1 July 2027. Keep:

- **Purchase records:** contract, settlement statement, stamp duty, legal and conveyancing fees. The ATO's [CGT record keeping guidance](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/keeping-records-for-property) says to keep these for at least 5 years after you sell.
- **Capital improvements, with dates.** Under the indexation system the new rules are modelled on, costs were indexed from when they were incurred, so the date of each renovation or improvement matters.
- **Evidence of value at 1 July 2027.** You don't have to decide on a method until you sell. If you think you'll want a valuation, some owners may prefer one prepared close to that date while comparable sales evidence is fresh. Talk to your accountant about whether it's worth the fee for your property.
- **Quarantined amounts, year by year.** If you bought an established home from 7:30pm AEST on 12 May 2026, keep a running record of each year's quarantined rental loss. You'll need it to claim the carried-forward amount against a later gain.
- **Proof of grandfathering.** Keep the dated contract showing you held the property, or had signed for it, before 7:30pm AEST on 12 May 2026.

Our guide to [rental property tax deductions](https://www.landlordweekly.com/articles/rental-property-tax-deductions) sets out which costs are deductible each year and which belong in the cost base.

## Why the Government changed CGT, and the pushback

The Government argues the 50% discount, introduced in 1999, favours asset income over wage income and property investors over first home buyers. It says indexation restores the original intent of taxing real gains. Treasury estimates, reported in the [Bills Digest](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd067), put the average tax rate on capital gains rising only modestly, from 19.3% to 21.4% over the next decade. The Budget explainer says about 1.1 million individuals, around 7% of taxfilers, reported a net capital gain in 2022-23.

Critics, also recorded in the Bills Digest, argued that extending the change to shares and business assets penalises investment outside property. The Financial Services Council said it could materially increase tax on Australians investing outside super. CPA Australia criticised the staged legislation and complexity. The Coalition, which dissented from the 2026 Senate select committee report on the discount, and One Nation opposed the bill. Any future Parliament could revisit the rules.

## What to do now

- **Don't sell just to beat 1 July 2027.** Model it first. The pre-2027 gain keeps the discount anyway.
- **Treat grandfathered properties as the valuable assets they now are,** and think twice before selling or transferring them.
- **Pull your cost base records together now,** and set up a folder for 1 July 2027 valuation evidence.
- **If you're buying,** compare a new build and an established home on after-tax cash flow and exit value, not the headline tax treatment. Our [new landlord guide](https://www.landlordweekly.com/articles/new-landlord-guide-australia) and [interest rates update](https://www.landlordweekly.com/articles/rental-market-interest-rates-september-2026) cover the rest of the numbers.
- **Check back.** The new build definition and the apportionment formula are still in draft as at 24 September 2026. We'll update this article when they're final.

## Frequently asked questions

### Has the 50% CGT discount been abolished?

For gains that build up from 1 July 2027, yes, for most assets held by individuals, trusts and partnerships. It is replaced by cost base indexation (only the gain above inflation is taxed) and a 30% minimum tax on those gains. Gains that built up before 1 July 2027 keep the 50% discount when you sell. The change is law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.

### Should I sell my investment property before 1 July 2027 to keep the 50% discount?

The rules are designed so you don't have to. Gains up to 1 July 2027 keep the 50% discount whenever you sell. Selling early mainly adds agent fees and, if you buy again, stamp duty. If the property was held at 7:30pm AEST on 12 May 2026, selling also gives up its grandfathered negative gearing. Get advice on your own numbers.

### How is my property's value at 1 July 2027 worked out?

You choose when you sell: either a valuation of the property as at 1 July 2027, or an apportionment formula that estimates the value from your purchase price, sale price and holding period. The formula is in a draft legislative instrument that was not yet final as at 24 September 2026. The Government says the ATO will provide tools.

### Does the 30% minimum tax apply to the whole gain on my rental property?

No. It applies only to real gains that accrue from 1 July 2027. Gains that built up before then are excluded. It also only matters if your normal tax on the gain would be less than 30%, and people who receive certain government payments at any time in the income year of the gain (including the Age Pension, JobSeeker, the Disability Support Pension, Carer Payment, family tax benefit and parental leave pay) are exempt.

### Do new builds still get the 50% CGT discount?

Yes. Investors who buy an eligible new build can choose either the 50% discount or indexation with the minimum tax when they sell. That choice does not pass to the next buyer. The final definition of a new build was still in draft as at 24 September 2026.

### Is my home affected by the CGT changes?

The main residence exemption is unchanged. If you have rented out part of your home or used it to earn income, the part of the gain that isn't exempt is taxed under the new rules for the period from 1 July 2027.

### Can I use rental losses that were quarantined under the negative gearing change against my capital gain?

Yes. Under the new method for working out your net capital gain, quarantined rental losses from established homes bought from 7:30pm AEST on 12 May 2026 reduce your residential capital gains before any discount is applied. That is often how those losses are finally used.


## Sources

- [Budget 2026-27: Tax explainer, negative gearing and capital gains tax reform](https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf)
- [Budget 2026-27: Budget Paper No. 2, Budget measures](https://budget.gov.au/content/bp2/download/bp2_2026-27.pdf)
- [Parliament of Australia: Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, bill progress](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7493)
- [Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, text as passed by both houses](https://parlinfo.aph.gov.au/parlInfo/download/legislation/bills/r7493_aspassed/toc_pdf/26072b01.pdf;fileType=application%2Fpdf)
- [Parliamentary Library: Bills Digest, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd067)
- [ATO: Tax reform, boosting home ownership, reforming negative gearing and capital gains tax](https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/tax-reform-boosting-home-ownership-reforming-negative-gearing-and-capital-gains-tax)
- [Treasurer: Second reading speech, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/second-reading-speech-treasury-laws-amendment-tax-reform-no-1)
- [Treasurer: Consultation on next tranche of tax reform legislation, 4 August 2026](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/consultation-next-tranche-tax-reform-legislation)
- [ATO: Keeping records for property (CGT)](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/keeping-records-for-property)
- [Explanatory memorandum, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026](https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r7493_ems_a90ad43e-17d7-4cd3-859b-84ac4e6f3dea/upload_pdf/JC018386.pdf;fileType=application%2Fpdf)
- [Parliament of Australia: Schedule of the amendments made by the Senate, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026](https://parlinfo.aph.gov.au/parlInfo/download/legislation/sched/r7493_sched_776af8ad-0010-41d2-8b19-b20a5ac02cf5/upload_pdf/Treasury%20Laws%20Amendment%20(Tax%20Reform%20No.%201)%20Bill%202026.pdf;fileType=application%2Fpdf)
- [Treasurer: Tax reform bill passes the Parliament, 25 June 2026](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/tax-reform-bill-passes-parliament)
- [Treasury consultation: Capital gains tax and negative gearing, tranche 2 legislation](https://consult.treasury.gov.au/c2026-792170)

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*General information only, not financial, legal or tax advice. Source: Landlord Weekly, https://www.landlordweekly.com/articles/cgt-changes-landlords-2026*