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Capital Gains Tax (CGT) – What’s Changing? If you own investments such as property, farmland, shares, or a business, Capital Gains Tax (CGT) is an important area to understand — especially with major proposed changes from 1 July 2027. What is Capital Gains Tax? Capital Gains Tax is the tax you pay when you make a profit from selling an asset. This could include: Investment properties Land & Farmland Shares Businesses Other investments Your capital gain is generally: Sale price minus what the asset originally cost you, including certain buying and selling costs. If you make a profit → you may pay CGT If you make a loss → the loss can usually be carried forward to offset future capital gains Current CGT Rules Under the current system, if you own an asset for more than 12 months, you may receive a discount on the taxable gain. Currently: Individuals and trusts generally receive a 50% CGT discount Superannuation funds generally receive a 33.33% discount Example If you make a $100,000 capital gain: Under current rules, you may only pay tax on $50,000 That discounted gain is then added to your taxable income and taxed at your normal marginal tax rates. Proposed CGT Changes From 1 July 2027 The Government has proposed significant changes to how Capital Gains Tax will work in the future. 1. The 50% Discount May Be Removed For assets purchased from 1 July 2027: The current 50% CGT discount may no longer apply Instead, asset costs may be adjusted for inflation (known as indexation) This means tax would apply only to the “real” gain above inflation. 2. A New Minimum 30% Tax Rate Under the proposed rules: A minimum 30% tax rate may apply to capital gains What this means: If your normal tax rate is below 30%, you may still pay 30% If your tax rate is higher than 30%, your normal rate may apply 3. Existing Assets Will Be Split Into Two Periods If you already own assets before 1 July 2027: The current rules may apply to gains earned up until 30 June 2027 The new rules may apply to any future growth after that date This may mean valuations at 1 July 2027 become important for some investors. 4. Pre-1985 Assets May No Longer Be Fully Exempt Currently: Assets purchased before 20 September 1985 are generally exempt from CGT Under the proposed changes: Future growth in these assets from 1 July 2027 onwards may become taxable Growth before that date is expected to remain exempt 5. Special Rules for New Residential Property To encourage housing construction: Investors in newly built residential properties may be able to choose between: The current 50% discount method, or The new indexation method with the minimum 30% tax rate What This Means for You These proposed changes could affect: Property investors Share investors Business owners Family groups and trusts Some important things to consider: The timing of selling investments may become more important Asset valuations at 1 July 2027 may be needed Some taxpayers may pay more CGT than under the current rules Long-term investment strategies may need reviewing Final Thoughts Capital Gains Tax has always been a complicated area, and these proposed changes could significantly affect future investment decisions. If you own, or are considering selling: Investment property Land & Farmland Shares A business Please call our office Importantly, these measures are still only proposed changes and will need to pass Parliament before becoming law.
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