The End of the 50% CGT Discount: What Property Investors Have 14 Months to Decide

By Andre Dirckze, Principal Adviser, Wealth Effect Group

Article 2 of our detailed Federal Budget 2026–27 series. For the overview briefing, see [link to hero article].

In the past few days since the Budget, we have had more inbound enquiries about capital gains tax than at any point in the past decade. The pattern of the questions is telling. Almost every caller starts with a version of the same sentence: "Should I sell my investment property before the rules change?"

The honest answer is: we cannot tell you from a phone call, and neither can anyone else. The right answer depends on numbers we have not yet seen — your purchase price, your current value, your loan balance, your marginal tax rate, your retirement timing, your other assets, and how the property fits into your broader wealth structure. Without those, anyone telling you what to do is guessing.

What we can do, and what this article does, is lay out clearly:

1.      What was announced — and what didn't change

2.      How the new rules work in real numbers

3.      The four planning archetypes we are seeing across our client base

4.      The questions to model before making any decision

5.      What to watch out for — including the predictable mistakes already being made

A brief note on status before we begin. The reforms in this article are Government announcements from Budget night, not enacted law. Draft legislation is yet to be released, Treasury consultation is yet to commence, and Parliament must pass any final legislation before it takes effect. We expect that process to play out across 2026 and into 2027 ahead of the announced 1 July 2027 commencement. None of this changes the planning framework — the questions to ask, the scenarios to model, the deadlines to track. It changes only the precision of any specific recommendation, which is why integrated advice still matters. The full legislative-status caveat sits in the disclaimer at the end of this article.

The most important sentence in this article: the cost of reacting to a Budget headline without proper modelling is almost always greater than the cost of the policy change itself. If you take nothing else from the next several minutes of reading, take that.

From 1 July 2027, the 50% capital gains tax discount that has applied to most investment assets held longer than 12 months by individuals, trusts and partnerships will be replaced. The new system has two components.

Component 1: CPI cost base indexation.

Instead of taxing 50% of the nominal capital gain, the tax system will index your purchase price (and other cost base elements) to inflation. You then pay tax on the real gain — the gain above inflation — at your marginal rate.

This is not new conceptually. It is a return to the system that operated in Australia from 1985 to 1999. The argument for it: it taxes real wealth creation, not paper gains caused by inflation.

Component 2: a 30% minimum tax on real gains.

Even after indexation, the effective rate of tax on the real gain cannot fall below 30%. For a taxpayer on the top marginal rate (47% including Medicare), the 30% floor has no practical effect — they were going to pay more than 30% anyway. For middle-income earners whose taxable income is otherwise low in the year of sale, the floor is the bite.

What did not change:

•       Gains accruing before 1 July 2027 continue to receive the existing 50% discount. This is preserved through a split-treatment apportionment for assets held across both periods, with valuation at 1 July 2027 to be established either by formal valuation or by an ATO-published formula.

•       The main residence exemption is unchanged.

•       The CGT discount inside superannuation is unchanged — 33⅓% in accumulation phase, tax-free in pension phase.

•       The small business CGT concessions are unchanged in full.

•       New build investors can elect between the old 50% discount and the new regime when they sell.

•       Income support recipients (including Age Pensioners) are exempt from the 30% minimum tax.

•       Pre-1985 assets remain CGT-exempt for gains accruing before 1 July 2027, but become subject to the new regime for gains accruing after that date — an important point for older portfolios.

The new-build election is significant and underreported. If you buy a new build after 1 July 2027, you get to compare the two regimes at the point of sale and choose the better outcome. That is a meaningful concession — though the new-build classification is lost on subsequent resale, so subsequent buyers do not inherit it.

Let's run a example.

Take an investment property purchased on 1 July 2020 for $700,000 (with $30,000 of acquisition costs, so a cost base of $730,000). Held by a couple as joint tenants, both on the 37% marginal tax bracket. Sold in 2032 for $1,400,000.

The capital gain in nominal terms is $670,000.

Under the old rules (the system being replaced from 1 July 2027):

•       Nominal gain: $670,000

•       Less 50% CGT discount: $335,000

•       Assessable gain: $335,000

•       Split across two joint owners: $167,500 each

•       Tax at 39% (37% plus 2% Medicare): approximately $65,300 each

•       Total CGT: approximately $130,600

Under the new rules (gains accruing entirely after 1 July 2027 — the simplified illustrative case):

•       Cost base indexed at 2% CPI for 12 years: $730,000 × 1.02¹² ≈ $926,000

•       Real gain: $1,400,000 − $926,000 ≈ $474,000

•       Split across two joint owners: approximately $237,000 each

•       Tax at 39% (above the 30% floor, so marginal rate applies): approximately $92,400 each

•       Total CGT: approximately $185,000

The difference: approximately $54,000 in additional tax for this property under the new system, on a 2% inflation assumption. If inflation runs higher than 2% — which is plausible given recent experience — the indexed cost base will be higher and the gap narrower. If inflation runs lower, the gap widens.

Critically, this is the simplified case where the new rules apply to the entire gain. In practice, this property was held across both periods — meaning the split-treatment apportionment significantly softens the impact. The portion of gain accrued to 30 June 2027 retains the 50% discount; only the post-2027 slice falls under the new indexed regime. For a long-held property, that pre-2027 slice can be substantial.

The apportionment matters more than most people realise. For a property bought in 2015 and sold in 2032, a significant portion of the total gain will have accrued before 1 July 2027 — and that portion continues to enjoy the 50% discount. The new rules only apply to the slice of gain accruing after the changeover date.

This is the single most important technical point in the entire CGT reform, and it is why the "panic-sell before 1 July 2027" instinct is usually wrong.

In the conversations we have had over the past few days, our 40+ property-investor clients tend to fall into one of four planning archetypes. The right strategy is meaningfully different for each.

 

A teacher, one investment property held since 2014 in suburban Melbourne, now worth $720,000 against a cost base of $530,000. She is 52, plans to retire at 65, and the property is essentially funding the gap between her superannuation balance and her desired retirement income.

For this client, the new CGT rules barely move the needle. The accrued gain to 30 June 2027 will retain the 50% discount under the apportionment. The post-2027 slice will be modest in absolute terms by retirement. If she sells in 2038 as planned, the tax difference between old and new rules is likely meaningful but not strategy-changing.

Recommended approach: model the numbers properly, but do not panic-sell. The more powerful planning conversation here is superannuation contribution strategy — using salary sacrifice and, where eligible, carry-forward concessional contributions (available where her total super balance is under $500,000 at the start of the relevant financial year) to deploy any spare cash flow into the most tax-favoured environment available. For a client in this position, the maths frequently favours hold-and-redirect rather than sell-and-reinvest.

 

A medical specialist couple, mid-50s, four investment properties bought between 2009 and 2019 across Brisbane, Sydney and the Gold Coast. Total portfolio value approximately $4.2m, total cost base approximately $1.9m. Currently negatively geared at the margin, with a combined household income of $480,000.

This is where the new rules bite hardest. The accrued gains are substantial, and a portion of future growth will be taxed under the new regime at effectively higher rates than they had planned around.

Recommended approach: the planning conversation is real and urgent — but not the conversation most clients assume. The options worth modelling include:

•       Strategic partial disposal — selling one or two properties before 30 June 2027 to lock in the 50% discount on accrued gain, with proceeds redeployed thoughtfully. The deployment options are where the real planning value sits: concessional super contributions for both members (with carry-forward where eligibility allows), bring-forward non-concessional contributions, aggressive home-loan paydown if any non-deductible debt remains, or repositioning into other asset classes that suit retirement income strategy.

•       Holding strategy — modelling whether long-term hold under the new rules still beats sale-and-redeployment, particularly given transaction costs and stamp duty on any replacement asset.

•       Year-of-sale super stacking — for any sale executed in the right financial year, the combined use of concessional contributions, carry-forward (if eligible), and bring-forward non-concessional can move very substantial amounts into the 15%-tax-rate super environment. Done well, this is the single most powerful tax-planning tool available to a couple in this position.

For this archetype, the difference between getting it right and getting it wrong is six-figure money.

 

A senior corporate executive, 46, two investment properties bought in 2019 and 2022, currently negatively geared and providing meaningful annual tax relief against a $380,000 salary.

For this client, the negative gearing changes (covered in detail in article 3) are more immediately relevant than the CGT changes. The CGT impact is real but distant — both properties were bought near recent peaks and the accrued growth is modest.

Recommended approach: focus the immediate planning on negative gearing strategy and whether the properties continue to fit the broader portfolio. The CGT modelling is a 10-year question, not a 14-month question.

 

A retired couple, both 64, who own one investment property purchased in 1998 for $180,000, now worth $1.1m. They have always intended to sell when they fully retire and roll proceeds into their SMSF and into their personal investment portfolio.

This is the archetype most likely to benefit from acting in the planning window. Almost the entire gain has accrued under the 50% discount era. Selling before 1 July 2027 locks in the favourable treatment on essentially all of the gain. The only question is sequencing — selling in the right financial year, with the right superannuation contributions deployed in the same year to manage the tax outcome.

Recommended approach: strong case for executing a planned sale before 1 July 2027, paired with carry-forward concessional contributions (where eligibility allows), a bring-forward non-concessional strategy, and careful management of the year-of-sale taxable income. Done well, the after-tax outcome can be materially better than waiting.

For any client weighing up a CGT-driven decision, these are the questions we model. We share them here because they are the right questions, whether you work with us, with another adviser, or on your own.

1. What is the split-treatment apportionment for each asset?

Of the total accrued gain at sale, how much was earned before 1 July 2027 (50% discount applies) and how much after (new rules apply)? For long-held assets, the post-2027 slice is often smaller than people assume.

2. What is the inflation assumption?

The new rules are CPI-indexed. The higher inflation runs, the better indexation works for you. Run scenarios at 2%, 3% and 4% CPI to understand the sensitivity.

3. What is the marginal rate in the likely year of sale?

A high-income earner today may be a retiree on a lower marginal rate at sale. The 30% floor matters here. So does the timing.

4. What happens to the proceeds?

Selling and parking in cash is rarely a good outcome. Selling and redeploying into superannuation, into a fully franked share portfolio, or into debt reduction can be excellent outcomes. The destination matters as much as the source.

5. What is the cost of transacting?

Selling costs (agent commission, legal), stamp duty on any replacement property, finance costs, and the friction of redeployment all reduce the apparent benefit of a sale.

6. What are the non-tax considerations?

Asset protection, family circumstances, retirement income strategy, estate planning, debt obligations, intended legacy — none of these show up in a CGT calculator, and all of them matter.

7. What does the modelled after-tax position look like in 2027, 2030 and 2035 under each scenario?

The right framework is not "what's the right answer today" — it's "which scenario produces the best after-tax outcome across the next decade." That requires proper financial modelling, not a back-of-envelope sum.

If any adviser tells you what to do with your property portfolio without working through this list — find another adviser.

In two weeks of inbound enquiries, we have seen the same predictable mistakes emerging across the market. We flag them here because the cost of avoiding them is zero, and the cost of making them is significant.

Mistake 1: Panic-selling assets that should be held.

The CGT changes are prospective. Significant portions of accrued gain remain protected by the 50% discount through the apportionment rules. Wholesale liquidation of well-performing assets rarely produces a better after-tax outcome than holding, particularly when transaction costs and the cost of redeployment are factored in.

Mistake 2: Bringing forward purchases to "get in before the deadline."

We have seen clients seriously considering accelerated property purchases before 12 May 2027 (the negative gearing grandfathering cutoff) — many of which would not have stacked up commercially in any other year. A bad property locked in for tax reasons is still a bad property in 2032. It does not become a good property because the tax treatment was favourable on entry.

Mistake 3: Acting on the headline, not the rules.

"The 50% CGT discount is gone" is technically true and practically misleading. It is gone for future gains on assets sold from 1 July 2027 onward. Most of the accrued gain on most existing assets is still protected. Decisions based on the headline produce different outcomes from decisions based on the apportionment rules.

Mistake 4: Ignoring the structure question.

Many of our clients hold investment properties through entities other than personal name. The interaction between the CGT changes and the new 30% minimum tax on discretionary trusts (from 1 July 2028) is significant for trust-held property. The 1 July 2027 to 30 June 2030 trust restructure rollover relief is a once-in-a-generation opportunity for some families — but it requires careful integrated planning, not a reactive decision.

Mistake 5: Trying to model this alone.

The CGT calculation is mathematically straightforward. The strategy that flows from it is not. The right answer depends on facts about your specific position that a calculator cannot capture, and the cost of getting it wrong materially exceeds the cost of getting proper advice.

For our existing client base, we are running Federal Budget Strategy Reviews that include:

•       Full CGT modelling under both old and new rules for each affected asset

•       Split-treatment apportionment scenarios at multiple inflation assumptions

•       After-tax outcome comparison across sell-now, sell-pre-2027, and hold-and-sell-later scenarios

•       Integrated strategy combining CGT, superannuation contributions, trust restructuring (where relevant), and broader portfolio considerations

•       Documented written advice that you can act on with confidence

For prospective clients reading this article: this is the level of analysis worth seeking before any significant CGT decision. Whether it comes from us or from another qualified adviser is less important to us than that it happens.

The CGT reforms are real, and they create real friction for the cohort that has done the most work building Australia's investment capital over the past three decades. We acknowledge that, and we do not minimise it.

But the reforms are also prospective, layered and full of nuance. The clients who emerge from this period in the best position will not be the ones who reacted fastest. They will be the ones who paused, modelled the numbers, made deliberate decisions, and avoided the predictable mistakes.

The window is 14 to 26 months. That is enough time, used properly. It is not enough time, used badly.

Upcoming articles include:

•       Negative Gearing Is Changing: What Existing Property Investors Should Do Now

•       Discretionary Trusts and the 30% Minimum Tax: Should You Restructure?

•       Why Superannuation Just Became the Most Important Asset on Your Balance Sheet

•       Selling a Business in the Next 10 Years: How the Budget Changed the Maths

•       The Pre-Retiree's Playbook: Navigating Budget 2026 in Your 50s and 60s

•       Aged Care, Estate Planning and the Sandwich Generation

Subscribe to our briefings at wealtheffectgroup.com.au to receive each as it is published.

 

If you own investment property, a family trust, a share portfolio, or a business you plan to sell — and you want your specific position modelled under the new rules before you make any decision — book a Federal Budget Strategy Review with our team.

wealtheffectgroup.com.au | SMSF trustees: wesmsf.com.au | $5m+ investable assets: weprivate.com.au

Andre Dirckze is the Principal Adviser of Wealth Effect Group, a national Australian financial advice business with offices in Melbourne and the Gold Coast.

This article contains general information only and does not take into account your personal objectives, financial situation or needs. It is not personal financial, tax, legal or investment advice. The numerical examples are illustrative only and rely on assumptions about inflation, marginal tax rates and timing that may not apply to your circumstances. The reforms referred to in this article are Federal Budget 2026–27 announcements only and have not yet been enacted as law. As at the date of publication, draft legislation has not been released, Treasury consultation has not been completed, and the measures must pass both houses of the Australian Parliament before becoming law. The final form of any legislation may differ from the announcements, the legislative timetable is subject to change, and a future government may amend or reverse any measure before it takes effect. Before acting on any of the strategies referenced, you should seek personal advice from a licensed financial adviser, registered tax agent and qualified legal practitioner who can consider your full circumstances.

Wealth Effect Group is an Authorised Representative of Boston Reed Ltd ABN 89 091 004 885, AFSL 225738. Andre Dirckze (AR 395157) and Wealth Effect Group (CAR 424768) are Authorised Representatives of Boston Reed Ltd. Wealth Effect Group Pty Ltd and its related entities accept no liability for any loss or damage arising from reliance on this article.