14/05/2026
BUDGET 26
What is Capital Gains Tax and its impact on Investors
Common Assets Subject to CGT
Investment properties (rental properties, holiday homes).
Capital Gains Tax (CGT) is a tax applied to the profit made from selling or disposing of assets, such as investment properties, shares, or cryptocurrency. It is not a separate tax but part of the income tax system, where net gains are added to your yearly income
A CGT event occurs when you sell an asset for more than its cost base (purchase price plus associated costs).
Included in Income: Net capital gains are taxed at your marginal income tax rate.
CGT Discount: If you hold an asset for more than 12 months, you are generally entitled to a 50% discount on the capital gain, meaning only half the profit is taxed.
Exemptions: The most common exemption is the "main residence exemption," meaning you usually do not pay CGT on the sale of your home.
Capital Losses: If you sell an asset for less than its cost, you make a capital loss. These cannot be deducted from regular income but can be used to offset future capital gains.
Reporting: You report capital gains and losses in your annual income tax return.
Key 2026 Federal Budget Changes (Effective 1 July 2027)
50% Discount Replaced: The 50% discount for assets held over 12 months is replaced by indexation (similar to pre-1999 rules), which adjusts the cost base for inflation.
Minimum 30% Tax Rate: A 30% minimum tax rate will apply to net capital gains, aimed at investors with high marginal rates.
New Property Exception: Investors in new residential property builds can choose between the 50% discount and the new inflation-based method.
Scope: The changes apply to assets held by individuals, trusts, and partnerships, including shares and investment properties, but not the main residence.
Transitional Arrangements: Assets purchased before 1 July 2027 will have gains up to that date calculated under the old 50% rule, while gains after that date fall under the new system.
