CGT Changes in Australia 2026: What Property Investors Need to Know Before Budget Night
- The 50% CGT discount (in place since 1999) is expected to be cut to 25–33% in the May 2026 Budget
- A $400K capital gain would cost you up to $32,000 more in tax under a 33% discount vs the current 50%
- No grandfathering is anticipated — existing property owners will be affected on future sales
- Separately, foreign resident CGT rules are being overhauled with retrospective application back to 2006
- The window to act before Budget night is closing fast
What the CGT Rules Were (Before)
Before 1985, Australia had no general tax on capital gains. This created a massive loophole — workers could take bonuses as shares instead of salary, sell them later, and pay less tax because the profit was a "capital gain" rather than income.
CGT was introduced in 1985 to close this gap and broaden the income tax base. From 1985 to 1999, the system used indexation (adjusting your cost base for inflation so you only paid tax on real gains) and averaging (smoothing out the tax spike from a large one-off gain).
The 1999 shift: the 50% discount
In 1999, the Howard Government replaced indexation and averaging with a simple flat 50% CGT discountfor assets held longer than 12 months. Instead of complex inflation calculations, you simply halved your gain. This is the system that has remained in place until now — and it's the system that's about to change.
| Era | Method | How It Worked |
|---|---|---|
| 1985–1999 | Indexation + Averaging | Cost base adjusted for CPI inflation; gains averaged over holding period |
| 1999–2026 | 50% CGT Discount | Simply halve the capital gain if asset held 12+ months |
| May 2026? | Reduced Discount | Expected cut to 25–33%, or possible return to indexation |
What's Changing — Two Reform Tracks
Track A: Domestic CGT discount cut
The Albanese Government is widely expected to announce a cut to the CGT discount in the May 2026 Federal Budget. The Senate Select Committee's final report (March 2026) found the current 50% discount distorts investment decisions, disproportionately benefits high-income taxpayers, and contributes to housing affordability pressures.
The Parliamentary Budget Office estimates the CGT discount costs the budget approximately $247 billion in forgone revenue over the next decade.
| Scenario | Discount | Taxable Gain on $400K | Tax at 45% | Extra vs Current |
|---|---|---|---|---|
| Current rules | 50% | $200,000 | $90,000 | — |
| Proposed (33%) | 33% | $268,000 | $120,600 | +$30,600 |
| Proposed (25%) | 25% | $300,000 | $135,000 | +$45,000 |
| No discount | 0% | $400,000 | $180,000 | +$90,000 |
Track B: Foreign resident CGT overhaul
On 10 April 2026, the government released draft legislation that dramatically widens the Australian tax base for foreign investors. The new definition of "real property" includes anything "fixed or installed on land for the majority of its useful life" — capturing wind turbines, data centres, mining equipment, and transmission infrastructure.
Most controversially, parts of the new definition apply retrospectively from December 2006. Historical transactions previously considered non-taxable could face audit, penalties, and interest.
Model Your Scenario
Use this interactive calculator to see how different CGT discount levels affect your after-tax position. Adjust the capital gain amount, discount rate, and your marginal tax rate to model your specific situation.
Illustrative only. Does not account for Medicare levy, capital losses, cost base adjustments, or individual circumstances. Consult a registered tax agent.
Who Gets Hit Hardest
The investors most exposed to a CGT discount cut are those sitting on the largest unrealised gains — typically long-term holders who entered the property market 15–30 years ago.
How to Prepare — Before and After
Before Budget Night (12 May)
Run your portfolio through 50%, 33%, and 25% discount scenarios. Use the calculator above for a quick estimate, then get your accountant to model your specific cost base.
If you have large unrealised gains and were already considering an exit, the pre-budget window locks in the current 50% discount. But weigh transaction costs carefully.
Personal name, trust, company, SMSF — each has different CGT treatment. Companies don't get the discount but pay 25–30% flat. SMSFs in pension phase pay 0%.
Transferring ownership is itself a CGT event. Restructure before acquiring new assets, not after.
After the Budget
If indexation returns, keep meticulous records of acquisition costs and capital improvements (renovations, extensions) — these are adjusted for inflation and directly reduce your taxable gain. Consider refinancing rather than selling to access equity without triggering a CGT event.
| Structure | CGT Discount | Tax Rate | Best For |
|---|---|---|---|
| Personal name | 50% (currently) | Marginal rate (up to 45%) | Simple portfolios, main residence |
| Family trust | 50% (currently) | Distributed to beneficiaries | Income splitting, flexibility |
| Company | None | 25–30% flat | If discount is abolished or cut deeply |
| SMSF (accumulation) | 33.33% | 15% | Long-term retirement assets |
| SMSF (pension) | 100% | 0% | Assets supporting income streams |
Key Dates
The Bottom Line
Whether the May 2026 budget changes the CGT discount by a little, a lot, or not at all — the uncertainty itself is a prompt to get your affairs in order. The investors who navigate this best won't be those who panicked and sold, or those who buried their heads. They'll be the ones who understood their position, modelled their options, and made informed decisions.
This article is general information only and does not constitute tax advice. Tax rules are complex and change over time. Consider independent advice from a registered tax agent for your specific circumstances.
The calculator folds the CGT discount, 6-year rule, and cost-base adjustments into a personalised number. See how much of that gain stays with you under each scenario, in 60 seconds.
Run my CGT scenario →Sources
- Commonwealth Bank Newsroom — "What is capital gains tax and why is everyone talking about it again?" (Feb 2026)
- Hudson Financial Partners — "CGT Discount Changes May 2026" (Mar 2026)
- RSM Australia — "How proposed CGT reforms could affect property investors" (Mar 2026)
- Corrs Chambers Westgarth — "Significant and retrospective CGT changes" (Apr 2026)
- Clayton Utz — "Sweeping tax changes for foreign residents" (Apr 2026)
- Parliamentary Budget Office — CGT discount revenue analysis
- Senate Select Committee on the Operation of the Capital Gains Tax Discount — Final Report (Mar 2026)