The 50% CGT Discount Ends in 2027: What Australian Investors Need to Decide Now

For twenty-five years the arithmetic of Australian investing has ended the same way: hold for more than twelve months and only half the gain is taxed. That single rule has shaped holding periods, portfolio design and the advice industry built around both. From 1 July 2027 it is being replaced.

Changes announced in the 2026–27 Federal Budget replace the 50% capital gains tax discount with cost base indexation plus a minimum tax on capital gains. The ATO has confirmed the changes do not affect Tax Time 2026, and gains accrued before the commencement date are reported as keeping the existing treatment.

This guide sets out what is changing, who it actually affects, who it does not, and the decisions that belong in the window before it starts rather than after.

This sits alongside the Trading in Australia hub.

What the two systems actually do

The current discount is simple to the point of bluntness. Own a CGT asset for more than twelve months, sell it, and half the gain is excluded from assessable income. It does not care whether the gain came from real growth or from inflation. On a 37% marginal rate, a $100,000 gain is assessed at $50,000 and costs $18,500.

Cost base indexation works on a different principle: it lifts your cost base in line with inflation, so you are taxed on the real gain rather than the nominal one. Australia used indexation before 1999, when the 50% discount replaced it.

The two produce very different answers depending on the asset and the era.

The blunt summary: the discount rewards any holding beyond twelve months equally. Indexation rewards long holding through inflationary periods and gives almost nothing to a thirteen-month hold. Layered on top is a minimum tax on capital gains, which sets a floor irrespective of how the cost base is calculated.

Who this actually hits

The decisions that belong in the window

The temptation is to do something dramatic before the commencement date. Resist that instinct and take the three that survive scrutiny.

Know where your unrealised gains sit. Not a vague sense – the actual cost base and acquisition date of every holding. Gains accrued before the change are reported as keeping the existing treatment, which makes the record of what you hold and since when the single most valuable document you own.

Do not sell a good asset for a tax reason. Realising a gain early to lock in the discount crystallises a tax bill you could have deferred for years, and takes the compounding with it. The maths only works in narrow cases, and the behavioural cost – selling something you would otherwise have kept – has ruined more portfolios than any tax change.

Re-run the holding-period logic afterwards, not before. The twelve-month cliff has quietly driven Australian selling behaviour for a generation. Under indexation there is no cliff, and the optimal behaviour is different. Wait for the legislated mechanics rather than pre-empting them.

Where this sits in Mind, Method, Money

Money, with a large Mind component. The rule is changing; the behaviour it triggers is the risk. An investor who sells quality holdings in June 2027 to beat a deadline has converted a tax question into a permanent capital-allocation mistake, and no indexation formula recovers that.

See what the long arithmetic looks like with the path to freedom calculator, and read the full Australian picture on the Australia hub.

Frequently asked questions

When does the 50% CGT discount end?

From 1 July 2027, according to changes announced in the 2026–27 Federal Budget, which replace it with cost base indexation plus a minimum tax on capital gains. The ATO has confirmed the changes do not apply to Tax Time 2026.

What happens to gains I have already accrued?

Gains accrued before the commencement date are reported as keeping the existing treatment. Confirm the legislated transitional detail before relying on it for anything irreversible, and make sure your acquisition dates and cost bases are documented.

Should I sell before July 2027?

Rarely, and not as a default. Selling early crystallises a tax bill you could have deferred and ends the compounding. It is worth modelling only for a specific holding you intended to sell anyway.

Does this affect CFD or forex traders?

No. Those profits are already ordinary income on revenue account under TR 2005/15, with no CGT discount available at any holding period.

Is indexation better or worse than the discount?

It depends on inflation and holding period. Indexation favours long holdings through inflationary periods; the discount favours anything held just past twelve months. Neither is universally better, which is why the answer has to be run on your own assets.

Sources: capital gains tax changes announced in the 2026–27 Federal Budget, replacing the 50% CGT discount with cost base indexation and a minimum tax on capital gains from 1 July 2027, with gains accrued before that date reported as keeping existing treatment; ATO confirmation that the announced changes do not apply to Tax Time 2026; ATO guidance on the CGT discount and the 12-month ownership requirement; ATO taxation ruling TR 2005/15. Worked figures are illustrative and exclude the Medicare levy. This is a Budget announcement – verify the legislated detail before acting. Last reviewed 26 September 2026.

Not tax, legal or financial advice. Take advice from a registered tax agent on your own circumstances.