The 2027 CGT changes, explained for advisers
From 1 July 2027 the 50% CGT discount gives way to CPI indexation and a 30% minimum tax for individuals. Who pays more, a worked example, and what to check in client portfolios before the date.
TL;DR
- The 50% CGT discount ends on 1 July 2027 for individuals, trusts and partnerships. The cost base is indexed to CPI instead, and resident individuals pay at least 30% on the gain. Law since 26 June 2026.1,2
- Growth before July 2027 keeps the discount, whenever the asset is sold. Unlisted holdings need a value at that date or the draft apportionment formula.3,4
- Top-rate taxpayers pay about 80% more on a strong long-held gain in our worked example (23.5% to 43% of the gain). Self-funded retirees who timed their sales go from about 11% to at least 30% on post-2027 growth.
- ESVCLP gains stay exempt. An exempt gain never enters the minimum tax calculation.5,1
- A start-up CGT concession is proposed for direct holdings. Founders, staff and early investors holding shares issued directly by a young, innovative company would keep a 50% discount. It's in draft, not law, and doesn't apply to investing through a venture fund.6,7
What changed?
The 50% discount, in place since 1999, gave a top-rate investor (47% with the Medicare levy) an effective 23.5% on a long-held gain.3 The 2026-27 Budget announced its replacement on 12 May 2026. The bill passed both houses on 25 June and received assent on 26 June 2026.8,1
From 1 July 2027 the cost base of an asset held 12 months or more is indexed to CPI, as it was from 1985 to 1999. Resident individuals then pay at least 30% on the real gain, including gains passed to them through a trust or partnership. Anyone who receives the Age Pension, JobSeeker or another listed income support payment during the year is exempt from the minimum tax.1,3 The next tranche of rules, including how to split a gain at 1 July 2027, is in the Tax Reform No. 3 Bill, introduced on 14 October 2026 and not yet law.9
What changed in the 2026-27 tax reforms
Budget night
Negative gearing cut-off. From 1 July 2027, losses on established dwellings bought after 7:30pm AEST only reduce residential property income and gains.3
Super tax over $3m starts
Higher tax on earnings for super balances over $3 million, and higher again over $10 million.10
Detailed rules drafted
Exposure drafts for splitting a gain at 1 July 2027 and defining a new build. The bill was introduced on 14 October 2026.4,9
Start-up concession drafted
Draft law for the Innovative Business CGT Concession, a 50% discount on gains from shares issued directly by young, innovative companies. Consultation closed on 28 September 2026.6
The switch
- 50% CGT discount removed for individuals, trusts and partnerships. Companies never had it.1
- Cost base indexed to CPI instead, so only the real gain is taxed.
- 30% minimum tax for resident individuals, with a top-up if the effective rate is lower. Income support recipients are exempt.
- Growth before this date keeps the 50% discount, whenever the asset is sold.
- Individuals selling a qualifying new build can still choose the 50% discount.
- ESVCLP and VCLP limits rise: bigger funds, bigger companies.11,12 Proposed
Who pays more under the new rules?
Anyone whose real return beats inflation by a decent margin pays more. Indexation taxes a modest gain more lightly than the discount did and a large one more heavily: with 3% inflation over ten years, the two break even at about 5.4% growth a year. Treasury's own analysis puts the past 20 years' effective rate for a top-rate taxpayer at roughly 20% to 30% of the nominal gain on average assets, higher where real returns are large.3 Venture outcomes sit at the large end.
Low-income investors who timed their sales lose the most in percentage terms. A self-funded retiree with no other income who sold shares for a $200,000 gain paid roughly 11% of it in tax. The post-2027 part of that gain will be taxed at no less than 30%, unless they receive the Age Pension or another exempt payment that year.1
The same gain, before and after July 2027
Companies are unaffected. Super funds keep their one-third discount (an effective 10% on long-term gains), though the new tax on super balances over $3 million, in force from 1 July 2026, takes some of that back.10 Discretionary trusts face a proposed 30% minimum tax from 1 July 2028.13,14 Which entity should invest? covers where new investments sit.
How much more tax? A worked example
A top-rate investor (47%) buys $100,000 of shares after 1 July 2027 and sells ten years later for $500,000. Inflation runs at 3% a year.
| Old rules (50% discount) | New rules (inflation-adjusted) | |
|---|---|---|
| Gain | $400,000 | $400,000 |
| Purchase price after inflation | n/a | $134,392 |
| Taxable gain | $200,000 | $365,608 |
| Tax at 47% | $94,000 | $171,836 |
| Effective rate on the gain | 23.5% | 43.0% |
The same outcome costs $77,836 more in tax, 83% more. Through an ESVCLP the gain would be exempt; the ESVCLP guide has the comparison, and the ESVCLP tax calculator runs other amounts.
Is there a CGT concession for start-up investors?
One is proposed. The Innovative Business CGT Concession would let founders, employees and early investors keep a flat 50% discount on gains from shares in young, innovative companies, instead of indexation and the 30% minimum tax. Treasury released draft legislation on 10 September 2026 and consultation closed on 28 September. As at 19 October 2026 no bill has been introduced, so it isn't law.6,7
For direct holdings only
The concession is for shares, options and convertible notes issued directly by an eligible company to the client, their family trust or an employee share trust. It doesn't cover a client's investment in a venture fund: in a venture capital limited partnership only the manager's carried interest can qualify. An ESVCLP partner's gains on eligible investments are already exempt, so the concession matters mainly for clients who also invest in start-ups directly or hold founder or employee equity.7,5
The Budget promised a consultation on how the CGT changes interact with incentives for start-ups, and Treasury's June 2026 consultation paper was the result.3,16 Several settings loosened between that paper and the September draft.
| Rule | June 2026 paper | September 2026 draft |
|---|---|---|
| Discount | 50% of the nominal gain, or the holder chooses indexation and the minimum tax | Same; the choice is made when the gain is realised |
| Minimum holding period | 5 years | 3 years |
| Company age when shares are issued | Under 10 years (15 considered for biotech, medtech and deep tech) | Under 15 years for all companies |
| Company turnover | Under $50 million | Aggregated turnover of $50 million or less in the prior year |
| Lifetime cap | $10 million of gains per individual | Removed |
| Other company tests | Unlisted, independent, active and innovative | Unlisted Australian resident company with at least half its staff and assets in Australia, passing innovation and activity tests, registered with the Industry Secretary |
| Who can't use it | Companies, super funds, foreign residents | Companies, super funds, public unit trusts, foreign residents |
| Existing shares | Transitional rules for companies under 10 years old at 30 June 2027 | Transitional rules for companies under 15 years old at 30 June 2027 with turnover of $50 million or less in 2025-26 |
Applies to CGT events from 1 July 2027 under the draft. Proposed only; the rules may change before a bill is introduced.16,6,7
For a client with founder shares or direct angel holdings, records matter now: issue dates, what was paid, and evidence the company met the tests when the shares were issued.
What to do before 1 July 2027
- Map the big unrealised gains. Pre-July 2027 growth is preserved without selling, so selling just to beat the date usually means paying tax years early.3
- Value unlisted holdings at 1 July 2027. Startup stakes and private company shares need a valuation at that date or the draft apportionment formula, which assumes steady growth over the holding period.3,4 For a company that took off before July 2027 the formula will understate the discounted portion, so keep evidence such as the last priced round.
- Decide where new growth assets sit. Super kept its discount, companies pay their flat rate, and ESVCLPs kept their exemption.
Frequently asked questions
On 1 July 2027, for individuals, trusts and partnerships. Growth up to that date keeps the 50% discount whenever the asset is sold.
Yes. The Tax Reform No. 1 Act received assent on 26 June 2026. Further detail, including how to split a gain at 1 July 2027, is in the Tax Reform No. 3 Bill introduced on 14 October 2026, which isn't law yet.
The cost base is indexed to CPI, and resident individuals pay at least 30% on the real gain. People receiving the Age Pension or other listed income support payments that year are exempt from the minimum.
Companies never had it. Super funds keep their one-third discount, though the new tax on balances over $3 million takes some of it back.
They keep the 50% discount. The split uses a valuation at 1 July 2027 or an apportionment formula that is still in draft.
No. The minimum tax is worked out on the capital gains left at the end of the usual CGT calculation, and an eligible ESVCLP gain is disregarded before that calculation starts.
One is proposed but isn't law. The Innovative Business CGT Concession would keep a 50% discount for founders, employees and early investors on shares issued directly by eligible young companies and held three years. Treasury's draft closed for comment on 28 September 2026.
No. It covers shares held directly in an eligible company, and in a venture capital limited partnership only the manager's carried interest can qualify. An ESVCLP partner's eligible gains are already exempt.
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Talk to us about Fund III
Tall Order is a Melbourne seed fund. Fund III is a registered ESVCLP for wholesale investors. Justine Lum, our Head of IR, works with advisers and their clients.
Sources
- Federal Register of Legislation, Treasury Laws Amendment (Tax Reform No. 1) Act 2026, as made 26 June 2026. ↩
- Australian Taxation Office, Tax reform: boosting home ownership, reforming negative gearing and capital gains tax. Confirms the measures are law (updated 29 June 2026). ↩
- Australian Government, Budget 2026-27, Tax explainer: Negative Gearing and Capital Gains Tax Reform. Transitional rules, indexation from 1 July 2027, minimum tax exemption for income support recipients, valuation or apportionment at 1 July 2027, new builds, main residence. ↩
- Treasury, Capital Gains Tax and Negative Gearing: Tranche 2 Legislation, exposure drafts released 3 August 2026, including how to split gains made before and after 1 July 2027. ↩
- Australian Taxation Office, ESVCLP tax incentives and concessions. ↩
- Treasury, Innovative Business CGT Concession: exposure draft legislation, explanatory memorandum and draft legislative instrument; consultation 10 to 28 September 2026. ↩
- RSM Australia, The Innovative Business CGT Concession: what the draft legislation means for founders, employees and early-stage investors. Eligible holders, 3-year holding, 15-year age limit, $50m turnover, cap removed, carried interest of VCLPs and ESVCLPs, transitional rules. ↩
- Accountants Daily, Controversial CGT changes clear both houses of parliament. ↩
- Parliament of Australia, Treasury Laws Amendment (Tax Reform No. 3) Bill 2026: introduced 14 October 2026, referred to the Senate Economics Legislation Committee (report due 13 November 2026). Before the House. ↩
- Grant Thornton Australia, Division 296 tax has passed Parliament and takes effect from 1 July 2026. ↩
- Australian Taxation Office, Tax reform: expanding venture capital incentives. ↩
- Treasury, Consultation and exposure draft: expanding venture capital tax incentives. ↩
- Australian Taxation Office, Tax reform: introducing a minimum tax on discretionary trusts. ↩
- Russell Kennedy, Trust tax reforms introduced: 30% minimum tax from income years starting 1 July 2028, restructure rollover 1 July 2027 to 30 June 2030 (bill introduced 14 October 2026). ↩
- Australian Government, Budget 2026-27, Tax reform: CGT discount, minimum tax, negative gearing, venture capital. ↩
- Treasury, Capital gains tax reforms: arrangements for innovative start-ups, consultation paper (June 2026). Proposed IBCC design: 50% discount, 5-year holding, under 10 years old, under $50m turnover, $10m lifetime cap, transitional rules. ↩