Following on from our previous blog, the changes to Capital Gains Tax take effect from 1 July 2027. What does this mean to you if you own assets that are subject to CGT?
Read on as we demonstrate the impact of these changes with case study examples and detail what you should do next.
What is the impact?
For some investors, the impact may be minimal, but for others who hold assets with substantial unrealised gains, the tax outcomes could be significantly different compared to the current system.
If you already own CGT assets, they will be subject to a combination of both regimes when sold post 30 June 2027 and be taxed at a minimum tax rate of 30% on the real gain above inflation.
Tip: This could include investment properties, business assets, trust interests, private company shares or other significant investments.
Case Study Example 1 – Taxpayer on a 19% marginal tax rate
Under the new changes, taxpayers will no longer be able to achieve effective tax rates below 30% on applicable capital gains.
This particularly impacts taxpayers with low taxable income as illustrated in the table below.
Jane is a retiree on a low marginal tax rate of 19%. She sells a parcel of shares and realises a gross capital gain of $50,000. Under the current rules, Jane can apply the 50% general discount on the capital gain and be taxed on the $25,000 net capital gain. The tax bill will be $4,750. Under the new rule, Jane will have a top-up tax of 11% on the capital gain and be taxed at 30% on the capital gain.
Example 2 – Inflation Adjustment Benefit
Where inflation has contributed significantly to the increase in value of an asset, the new indexation rules may provide some relief as illustrated in the following example.
Chris bought a property for $1.1m and sold the property for $1.4m. For the purposes of this example, we have assumed that Chris has no other income. Under the current rules, Chris will pay tax on the net capital gain at his marginal tax rate after applying the 50% discount. Under the new rules, Chris will receive an inflation indexation to the cost base of the property and pay a minimum 30% tax on the capital gain.
Example 3 – Sale of Business
Paul and Maria have owned and operated a manufacturing business for more than 15 years. They are in their mid-60’s and plan to retire in 2028 and sell the business for $3m. The capital gain is expected to be $2m.
On the assumption that Paul and Maria qualify for the Small Business 15-Year Exemption, the entire capital gain may be disregarded. Therefore, the CGT reforms may have little practical effect because the Small Business 15-Year Exemption can override the general CGT outcome.
If Paul and Maria do not satisfy the Small Business CGT concession requirements, the capital gain will be subject to the new CGT rules, including the indexed cost base and a minimum 30% tax for gains accruing after 30 June 2027.
What should you do now?
The biggest planning opportunity isn’t necessarily selling assets before 30 June 2027. It is about understanding which assets are likely to be sold over the next decade and developing a strategy early.
It’s important to obtain a valuation of your assets from an appropriately qualified valuer close to 30 June 2027, otherwise you run the risk of the ATO applying their formula based on the growth rate over the holding period. This could potentially result in additional tax being paid.
Contact your TAG Representative for a CGT Readiness Review to assist you in making an informed decision before the new rules take effect. We’ll guide you through the valuation process, coordinate the required information, and ensure you are prepared for the changes ahead.
For business owners, the real planning opportunity is ensuring that you can access the Small Business CGT concessions when the time comes to sell.
Get in touch, call us on 03 9886 0800 or email team@tagfinancial.com.au
Refresh your knowledge on the Capital Gains Tax laws in the part 1 blog.
Note: Whilst AI may have been used to assist in the research of this document, the content has been written and reviewed by a representative of TAG Financial Services Pty Ltd.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2026. Please do not reproduce without the expressed written consent of the author.