CGT Regime Classification

Budget Update — 12 May 2026

The 2026 Federal Budget replaces the 50% CGT discount for residential investment property with an indexation method plus a 30% minimum tax rate, from 1 July 2027. When the new rules apply depends on when you acquired your property and when you sell.

Your situation	CGT treatment
Any acquisition date — sold before 1 July 2027	Old rules fully preserved — 50% discount applies as normal
Acquired before 7:30pm AEST 12 May 2026 — sold after 1 July 2027	Split regime — the gain up to 1 July 2027 gets the 50% discount; the gain from 1 July 2027 to sale date is taxed under the new rules
Acquired after 7:30pm AEST 12 May 2026 — sold after 1 July 2027	New regime — indexation method with 30% minimum tax. No 50% discount available
New build — any acquisition date	Choice — you can elect either the 50% discount or the indexation method, whichever produces the lower tax
Complying superannuation fund — any situation	No change — 1/3 discount and 15% flat rate unchanged
Company — any situation	No change — 30% flat rate, no discount was available anyway

How the new indexation method works

Your cost base is indexed for inflation (CPI) from acquisition to sale. Tax is assessed at your marginal rate on the real (inflation-adjusted) gain. A 30% minimum tax floor then applies on the nominal (pre-indexation) gain — meaning you pay whichever is higher: your marginal rate on the real gain, or 30% of the nominal gain.

The split regime — why a 1 July 2027 valuation matters

If your property straddles both regimes (acquired before tonight, sold after 1 July 2027), the gain is split at 1 July 2027 using either a formal independent valuation at that date, or time apportionment based on days held in each period. A formal valuation often produces a larger old-regime (discounted) portion. Speak to your accountant before 1 July 2027 if this applies to you.

Budget 2026 Timing Calculator →

Summary of confirmed Budget 2026 measures. Exposure draft legislation has not yet been published and details are subject to change. This is not financial or tax advice.

TL;DR — What the 2026 Budget Confirmed on CGT

Properties sold before 1 July 2027: old rules apply — 50% discount for 12+ month holds.
Properties acquired before Budget Night, sold after 1 July 2027: split regime — old rules for pre-2027 gain, new rules for post-2027 gain.
Properties acquired after Budget Night, sold after 1 July 2027: new regime only — indexation replaces the 50% discount, plus a 30% minimum tax floor on the nominal gain.
New builds: can elect either the 50% discount or indexation — whichever produces a lower tax bill.
The new rules are always more expensive than the 50% discount for Australian investors at any income level.
Super funds: unchanged (1/3 discount, 15% flat). Companies: unchanged (30% flat, no discount).

Overview

The 2026 Federal Budget — handed down on 12 May 2026 — confirmed the replacement of the 50% capital gains tax discount with an indexation-based system plus a 30% minimum tax floor. These changes apply from 1 July 2027, with a split regime for properties acquired before Budget Night.

This guide explains the confirmed rules, the split regime in detail, worked examples with corrected numbers, and the election available for new builds. All figures use the confirmed 2025–26 ATO marginal tax rates.

2025–26 Marginal Tax Rates (Including 2% Medicare Levy)

Taxable income	Marginal rate (incl. Medicare)
$0 – $18,200	0%
$18,201 – $45,000	18%
$45,001 – $135,000	32%
$135,001 – $190,000	39%
Over $190,000	47%

The Three CGT Regimes at a Glance

Scenario	Which rules apply?
Property sold before 1 July 2027 (any acquisition date)	Old rules: 50% discount for holds >12 months. Tax at marginal rate on discounted gain.
Acquired before Budget Night (7:30pm 12 May 2026), sold after 1 July 2027	Split regime: Pre-2027 gain taxed under old rules; post-2027 gain taxed under new rules.
Acquired after Budget Night, sold after 1 July 2027	New rules only: Indexation + 30% minimum floor on nominal gain.
New build (any acquisition date), sold after 1 July 2027	Election: Choose either 50% discount OR indexation method — whichever gives lower tax.

How the New Regime Works

The new CGT regime for established properties acquired after Budget Night has two components that interact:

Component 1: Indexation

The cost base of the property is adjusted upward by the Consumer Price Index (CPI) from the date of acquisition to the date of sale. This removes the inflation component from your capital gain — you are only taxed on the real (inflation-adjusted) gain. If the property appreciated at exactly the rate of CPI, the taxable gain would be zero.

Formula: Real gain = Sale price − (Cost base × CPI at sale / CPI at acquisition)

At 2.5% annual CPI, a $600,000 property held for 10 years would have an indexed cost base of approximately $768,000.

Component 2: The 30% Minimum Tax Floor

Even after applying indexation, there is a second calculation: 30% of the nominal gain (the pre-indexation gain — simply sale price minus original cost base). The final tax payable is the greater of:

Your marginal rate applied to the real (indexed) gain, or
30% of the nominal gain

This floor prevents high-income investors from fully sheltering a property gain behind indexation by ensuring a minimum contribution.

Exception: Income support recipients are exempt from the 30% floor. They pay only the marginal rate on the real gain, with no floor.

The Critical Point: New Rules Are Always More Expensive Than the 50% Discount

Under the old 50% discount, the maximum effective CGT rate on any gain was 23.5% (50% × 47% top rate). The 30% minimum floor alone exceeds this at every income level. The new regime is unambiguously worse for Australian investors in all scenarios.

This is an important point that was misrepresented in some pre-budget commentary suggesting the new regime might benefit some investors. That analysis was incorrect. The comparison:

Old rules (50% discount, top rate): effective rate = 23.5% of nominal gain
New rules (30% floor): minimum effective rate = 30% of nominal gain

Even for investors at lower income brackets where the marginal rate on the real gain might be modest, the 30% floor still applies to the full nominal gain and will typically produce a higher tax bill than the 50% discount would have.

Worked Example: $600,000 Purchase — Full Comparison

Purchase price: $600,000. Held for 10 years. Annual CPI: 2.5%. Indexed cost base after 10 years ≈ $768,000. Seller is at the 47% marginal rate. Assume purchase was after Budget Night (new rules apply).

Sale price	Nominal gain	Old: 50% disc, 47% rate	Real gain (indexed)	47% on real gain	30% on nominal	New rules (higher)
$1,000,000	$400,000	$94,000	$232,000	$109,040	$120,000	$120,000
$1,200,000	$600,000	$141,000	$432,000	$203,040	$180,000	$203,040
$1,500,000	$900,000	$211,500	$732,000	$344,040	$270,000	$344,040
$2,000,000	$1,400,000	$329,000	$1,232,000	$579,040	$420,000	$579,040

Assumptions: $600K purchase, 10-year hold, 2.5% annual CPI, indexed cost base ≈ $768K. New rules column shows max(47% × real gain, 30% × nominal gain). Old rules column shows 47% × (nominal gain × 50%).

The Split Regime Explained

If you acquired an established property before Budget Night (7:30pm AEST 12 May 2026) and you sell after 1 July 2027, you are in the split regime. This is the most complex of the three situations.

How the gain is split

The gain must be apportioned between the period before 1 July 2027 (old rules) and the period from 1 July 2027 (new rules). The ATO recognises two apportionment methods:

Market value at 1 July 2027 (preferred method). If you can obtain or reliably estimate the market value of the property as at 1 July 2027, the pre-2027 gain is the difference between the cost base and that market value, and the post-2027 gain is the difference between that market value and the sale price. A formal valuation is the most defensible approach.
Time apportionment. If market value evidence is not available, the gain may be apportioned on a straight-line basis by the number of days held in each period. This is simpler but may not reflect economic reality if most appreciation occurred in one period.

Split regime — worked example

Property acquired 2015 for $500,000. Market value at 1 July 2027: $950,000. Sold 2030 for $1,200,000. Investor at 47% marginal rate.

Component	Calculation	Tax
Pre-2027 gain (old rules)	$950K − $500K = $450K gain → 50% discount → $225K taxable × 47%	$105,750
Post-2027 gain (new rules)	$1,200K − $950K = $250K nominal. Assume 3.5yr hold, 2.5% CPI → indexed base ≈ $983K → real gain ≈ $217K. Max(47% × $217K, 30% × $250K) = max($102K, $75K)	$101,990
Total CGT payable		$207,740

Pre-1985 Assets

Pre-CGT assets (acquired before 20 September 1985) are in the CGT net from 1 July 2027 for any gain that accrues from that date onwards. Gains that accrued before 1 July 2027 remain outside the CGT net. In practice, this means the market value at 1 July 2027 becomes the new "cost base" for CGT purposes on these assets, and only appreciation above that value triggers CGT upon eventual sale.

New Build Election

New residential construction acquired from any date — before or after Budget Night — can elect to use either:

The 50% discount (old rules), or
The indexation method (new rules — but without the 30% floor)

Investors with new builds should model both methods at the time of sale and elect whichever produces the lower outcome. In general, the 50% discount will be favourable for high-growth properties, while indexation will be more favourable for lower-growth properties in high-inflation periods.

Note that the 30% minimum floor does not apply when new build investors elect the indexation method — this is a significant concession relative to the treatment of established properties.

Superannuation Funds and Companies — Unchanged

The following entities are unaffected by the budget changes:

Entity type	CGT treatment
Complying superannuation funds	1/3 discount (for >12 months) + 15% flat tax rate — unchanged
Companies	30% flat corporate rate, no discount — unchanged

Individuals in super funds should note that the effective CGT rate within a complying fund remains favourable compared with holding personally under the new regime.

Discretionary Trust Minimum Tax (Separate Measure)

From 1 July 2028 — one year after the CGT changes — a separate measure introduces a 30% minimum tax on discretionary trust net income distributed to individual beneficiaries. This is a separate measure from the CGT changes, and it operates as follows:

The trust still computes net income as normal.
If the trust distribution to an individual is taxed at less than 30% in the hands of the beneficiary, a top-up tax applies to bring the effective rate to 30%.
Individual beneficiaries receive a non-refundable credit against their own income tax.
Company beneficiaries receive no credit — the full 30% applies at the trust level for company distributions.

This measure primarily affects higher-income families who use discretionary trusts to split income among lower-bracket beneficiaries. Its interaction with the CGT changes is complex and requires specific advice in your circumstances.

Impact on Common Investment Strategies

Holding established property long-term

For properties acquired after Budget Night, the longer you hold, the larger the real gain relative to the nominal gain — meaning the 47% on real gain component increasingly dominates over the 30% floor. At very long hold periods with strong capital growth, the tax on the real gain will be the controlling figure. The old 50% discount would always have been more favourable.

Selling before 1 July 2027

If you currently hold an established property, selling before 1 July 2027 means the old CGT rules apply — including the 50% discount. This is not a recommendation to sell, but it is a factual point relevant to those who were already considering a sale in the near term.

New builds as a relative advantage

For investors comparing established property and new builds, the budget widens the gap further. New builds get the election (no minimum floor when choosing indexation) and retain the 50% discount option. Established properties acquired after Budget Night get neither. Combined with the negative gearing exemption for new builds, the policy clearly incentivises new construction over established property purchases.

Defer realisation

For properties already in the split regime (acquired before Budget Night), the optimal strategy will often be to sell in a year where the post-2027 gain is minimised — either by selling close to 1 July 2027 while market values are similar, or by holding long enough that the quarantined negative gearing losses have accumulated to meaningfully reduce the capital gain. These calculations are complex and depend heavily on individual circumstances.

Frequently Asked Questions

Does the 50% CGT discount still exist?

Yes — for grandfathered properties, new builds electing the discount, and any property sold before 1 July 2027. The 50% discount is abolished only for established properties acquired after Budget Night and sold after 1 July 2027.

Is the 30% floor a tax rate or a minimum payment?

It is a minimum payment. You calculate CGT two ways — 47% (or your applicable marginal rate) applied to the real indexed gain, and 30% applied to the full nominal gain — and you pay whichever is higher.

If I have a capital loss, does that still apply?

Yes. Capital losses from other assets can still be applied to reduce the CGT gain before calculating either the indexation-based tax or the 30% floor. The sequencing of loss application and floor calculation is governed by the legislation and should be confirmed with a tax adviser for your specific situation.

Does the 30% floor apply within superannuation?

No. Complying superannuation funds are unchanged. They continue to apply a 1/3 discount and 15% flat rate. The 30% floor only applies to individual taxpayers holding property outside super.

What happens to properties held jointly between spouses?

The rules apply to each owner's share individually. If the property was acquired jointly before Budget Night, both owners' shares are in the split regime when the property is sold after 1 July 2027. The apportionment of the gain follows each person's ownership percentage.

How is CPI measured for indexation purposes?

The ATO will use the All Groups Consumer Price Index (CPI) as published by the Australian Bureau of Statistics, measured quarterly. The legislation specifies the index numbers to be used at acquisition and at sale — likely Q4 of the year of each event. Detailed ATO guidance on the specific index application is expected before the regime begins.

Are there any anti-avoidance provisions?

Yes. The budget included general anti-avoidance provisions to prevent artificial restructuring designed to access the old-rules treatment. For example, manufacturing a disposal before 1 July 2027 followed by a buyback from a related party may be caught by Part IVA. These provisions will be detailed in the exposure draft legislation.

I bought off-the-plan before Budget Night. Which rules apply?

If the contract was entered into before 7:30pm AEST 12 May 2026 and the property is a new build, you have the best outcome: your property is grandfathered in terms of CGT (or can elect indexation if that is better), and negative gearing is fully preserved. The fact that settlement occurs after Budget Night, or even after 1 July 2027, does not affect the grandfathering of the pre-Budget Night contract.

Use the Budget 2026 Calculator

The numbers in this article illustrate the principles, but your outcome depends on your purchase price, the sale price, your marginal rate, the hold period, and whether the property is grandfathered, transitional, or under the new regime. Propperly's Budget 2026 CGT calculator lets you enter your exact numbers and see the comparison between old and new rules, including the split regime calculation for pre-budget properties.

Disclaimer: This article provides general information about confirmed legislative changes announced in the 2026 Federal Budget. It is not financial, tax, or legal advice. The CGT rules involve detailed provisions, anti-avoidance measures, and transitional rules that interact with your specific circumstances. Always seek advice from a registered tax agent or financial adviser before making decisions about property acquisition, disposal, or restructuring.

CGT Investment Property Australia 2026 — Budget Confirmed | Propperly