For nearly 30 years, Australian investors have relied on the 50% CGT discount when selling shares, property and other assets held for more than a year. From 1 July 2027, that changes. If you're retired or planning to be, now is the time to understand what's different and what you can do about it. Good advice can help you manage the impact on your investments.
What's changing?
From 1 July 2027, for individuals, trusts and partnerships The 50% CGT discount is replaced by cost base indexation. Instead of halving your gain, the cost of your asset is adjusted for inflation, so you're taxed on the real gain. A 30% minimum tax rate applies to those real gains. Even if your marginal tax rate would otherwise be lower, the effective rate on the gain won't fall below 30%.
Gains accrued before 1 July 2027 keep the old treatment. Capital gains accrued before that date continue to be taxed under the current rules, including the 50% discount.
What isn't changing?
Your family home: The main residence exemption is not being altered. Super: Capital gains inside superannuation are taxed as before, including the one-third discount for complying funds holding assets over 12 months. In pension phase, capital gains are tax free. Companies: Companies aren't affected, as they already pay tax on gains at the company tax rate.
Why this matters more for retirees
Many retirees hold investments outside super, such as a share portfolio, an investment property or a managed fund, and sell down assets to fund their lifestyle. Previously, a retiree with modest taxable income could realise gains and pay little tax on them. The 30% floor changes that maths for gains accruing after mid-2027.
Inflation indexation may help in some cases, particularly for long-held assets in high-inflation periods. But for assets with strong real growth, the tax bill could be higher than under the old system. There are also exemptions from the minimum tax for recipients of certain income support payments, so your eligibility and circumstances matter. It is important to seek advice in view of your situation.
Five things to consider before 1 July 2027
1. Establish your baseline. Because gains are split between "before" and "after" 1 July 2027, records matter. Gather purchase dates, cost bases, reinvested distributions and improvement costs, and get valuations where needed. Good records will help with tax management.
2. Weigh up whether to realise gains under the old rules. For some investors, selling or restructuring before 1 July 2027 will lock in the 50% discount on the full gain to date. But tax should never be the only driver. Transaction costs, the tax you'd pay now, your income in the year of sale and your long-term goals all matter, and for many people holding on remains the better choice.
3. Make the most of super. With super's concessional treatment unchanged, it may become even more attractive relative to investing outside super. Depending on your age, balance and contribution caps, options can include personal deductible contributions, non-concessional contributions, and downsizer contributions if you're selling the family home. Rules around caps and eligibility are strict, so get advice before acting.
4. Plan the sequence of your drawdowns. In retirement, which assets you sell, and when, can materially affect your tax. Staging sales across financial years, using capital losses, and matching sales to your lower-income years can reduce the overall bill.
5. Revisit your estate and structure. If you hold assets in a trust, a partnership or joint names, the new rules apply differently to each. It's also worth reviewing how CGT interacts with your estate plan, so your beneficiaries aren't left with avoidable surprises.
Investment properties
If you own an investment property, note that the CGT changes apply to all investment property regardless of purchase date, split into pre and post 1 July 2027 portions. That's separate from the negative gearing changes, which have their own grandfathering rules. Owners of new residential dwellings and affordable housing may choose whether to keep the current CGT discount or apply the new indexation framework.
The new rules won't affect everyone equally. For some retirees the impact will be small, for others it could reshape how and when they draw on their wealth. The window before 1 July 2027 is an opportunity to review your position with a clear head, not to make rushed decisions. If you are unsure, we can do the modelling for you to compare your pre- and post-2027 position so you can build a retirement strategy that fits your goals. Get in touch.
General Advice Warning: The information provided in this article is general in nature and does not consider your particular investment objectives, financial situation, or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.
Dobbrick Financial G Pty Ltd ABN 57 686 172 109 and Dobbrick Financial Services (Ipswich) ABN 86 100 184 521 and their advisers are authorised representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
