Understanding the CGT Changes from 1 July 2027
The Australian Government has announced major changes to Capital Gains Tax (CGT) that will take effect from 1 July 2027 - the most significant change to Australia's CGT system in decades.
Importantly, the changes are not retrospective. Increases in asset values before 1 July 2027 will generally continue to be taxed under the current 50% discount, while only gains occurring after that date will fall under the new rules. For assets held across the 1 July 2027, this effectively means splitting the gain into a “before” and “after” component.
The current 50% CGT discount for individuals, trusts and partnerships will be replaced with two new mechanisms: cost base indexation (adjusting an asset's cost base for inflation) and a new 30% minimum tax rate on capital gains.
Because past gains are protected by this mechanism, there's no strong tax incentive to rush a sale purely to "beat" the changes. That said, timing can still matter for reasons specific to your circumstances and this is worth working through on a case-by-case basis.
Establishing an Asset's Value
For assets held at the 1 July 2027, you will eventually need to establish their market value as at this date, so the gain or loss on disposal can be split into pre and post components. There are two ways to do this:
- Get a formal valuation of the asset as at 1 July 2027 (for listed assets like shares, quoted market prices can generally be used); or
- Use an ATO-provided apportionment formula, which estimates the asset's value at 1 July 2027 based on its growth rate over the full holding period.
This is determined as part of your tax return in the year the asset is eventually sold, so there's no immediate action required - but keeping good records now (purchase price, dates, and costs) will make this easier down the track.
Asset Costs will be indexed to CPI
The cost base - the amount used to calculate capital gains - of assets from 1 July 2027, will be indexed to CPI (the Consumer Price Index).
For existing assets, the amount indexed will be the market value as at 1 July 2027. For assets purchased after 1 July 2027, the purchase price will be indexed from the date of purchase.
Pre-CGT Assets
Assets acquired before 20 September 1985 have been exempt from CGT altogether, regardless of when they're eventually sold. Under the new rules, that exemption continues for any increase in asset value before 1 July 2027. But from 1 July 2027 any gains accruing will become subject Capital Gain Tax under the new indexation and minimum tax rules.
How These changes Affect Business Owners
Under these changes, it is possible that the tax payable on the sale of your business could be significantly higher than under the current framework. However, the Small Business CGT concessions will remain available to many small business owners - and from 1 July 2027, even more businesses will be able to access these concessions as the turnover threshold rises from $2 million to $10 million.
Many business owners will find it difficult to value their business as at 1 July 2027. If you are considering selling your business in the coming years it is important to speak with a business specialist as the new framework can be complex.
Get in touch with the Bizally team to understand how these changes might apply to you and your business.
Special rules: new homes and affordable housing
New residential dwellings and affordable housing are excluded from the assumed sale for tax purposes and instead follow their own rules. For qualifying new dwellings, individuals may be able to choose between the CGT discount method and indexation, with the choice made when lodging the tax return for the year of sale. Affordable housing is expected to retain its current CGT treatment for eligible investors.
We're here to help
If you'd like to understand how these changes might apply to you and your business, get in touch with the Bizally team.