Reduction of capital gains tax

As previously discussed, the assessable portion of capital gains on assets held for more than 12 months, may be reduced, by a discount factor. The discount that is applied will depend upon the entity that owns the asset:

• Individuals and trusts (50% discount) – half of the capital gain is included in assessable income (for trusts this applies if the distribution is made to an individual) 
• Super Funds (1/3 discount) - two thirds of the capital gain is included in assessable income
• Companies (no discount) - all of the capital gain is included in assessable income

Please note: The 2026 Federal Budget proposed changes in the method and taxing of the capital gains tax legislation. These were officially passed into law on 26 June 2026. From 1 July 2027, the method used to determine the assessable capital gain for assets acquired after this date will change from applying a 50% discount factor to the capital gain to a method where only the real capital gain will be assessed. Under the revised approach, the cost base of the asset will be indexed for inflation, so only the real gain will be taxed.

In addition, there will also be a minimum tax rate of 30% applied to the real capital gain. 

CGT assets acquired before 1 July 2027 but sold after 1 July 2027 will be subject to a transitional regime which is dependent upon when the asset was acquired and sold as follows:

• Where the asset is purchased and disposed of before 1 July 2027 – the current CGT rules apply.
• Where the asset is purchased before 1 July 2027 and disposed of after that date:
  • Capital gains made up to 30 June 2027 will be subject to the current CGT discount rules.
  • Capital gains made after 1 July 2027will be subject to the new CGT indexation rules.
• Where the asset is purchased and disposed of after 1 July 2027 – the new CGT rules apply.

The revised CGT measures apply to assets held by individuals, trusts and partnerships where the asset has been owned for at least 12 months.  Importantly, this revised approach does not apply to new residential buildings.  For qualifying new residential properties, taxpayers will have the option for either:

• applying the existing 50% CGT discount approach; or
• applying the revised approach which only assesses the real, inflation adjusted capital gain, together with the application of the minimum 30% tax rate applied to the real capital gain.

There will be no change to the taxing of capital gains tax within superannuation funds.  Super funds will continue to apply a one-third discount factor to determine the assessable capital gain.