CGT Discount Abolished: What It Actually Means for Property Investors

What the 50% CGT discount actually is

The 50% CGT discount is a concession that reduces the taxable portion of a capital gain by half for Australian resident individuals who hold an asset for at least 12 months. If you make a $300,000 capital gain, only $150,000 is added to your taxable income. At the 47% marginal rate, you pay $70,500 in CGT instead of $141,000.

This discount has been in place since 1999 when it replaced the CPI indexation method that operated from 1985 to 1999.

What 'abolished' actually means

The discount is not abolished for everyone. It's abolished for established investment properties purchased after Budget night (7:30 PM AEST, 12 May 2026). Properties purchased before that date are grandfathered — the discount continues to apply to gains accruing before 1 July 2027.

For properties purchased after Budget night, from 1 July 2027, the discount is replaced by CPI indexation — the same method used from 1985 to 1999.

What replaces it: CPI indexation

Under CPI indexation, your cost base is adjusted upward by the increase in the Consumer Price Index. You only pay tax on the 'real' gain — the gain above inflation. A 30% minimum tax rate applies to the real gain.

For a property purchased in 2026 for $1.5M and sold in 2036 for $2.5M, if CPI increased by 3% p.a. over 10 years, the indexed cost base would be approximately $2.016M. The taxable gain would be $484,000 — compared to $500,000 under the old rules (no indexation). At 47%, the tax saving from indexation is about $7,520.

The real dollar impact

For most investors at the top marginal rate, the abolition of the 50% discount and replacement with CPI indexation will result in a higher tax bill — unless inflation is high enough to make indexation more favourable.

For a property with a $500,000 gain at 47% marginal rate: - Old rules (50% discount): $117,500 CGT - New rules (3.1% CPI, 10yr hold): ~$140,000 CGT - Extra tax: ~$22,500

For a property with a $500,000 gain at 47% marginal rate with high inflation (5% p.a., 10yr hold): - New rules (5% CPI): ~$105,000 CGT - Old rules would have been: $117,500 - Saving from new rules: ~$12,500

Who is most affected

The abolition of the 50% discount has the biggest impact on:

• Investors who purchased established properties after Budget night and plan to sell in a low-inflation environment
• Investors at the top marginal rate (47%)
• Investors with large unrealised gains relative to their cost base
• Short-to-medium term holders (5–10 years) where CPI indexation provides less benefit

Who is least affected (or better off)

The change has the least impact on:

• Investors with grandfathered properties who sell before the cliff (no change)
• Long-term holders in a high-inflation environment (CPI indexation may be more favourable)
• Investors purchasing new builds (retain the 50% discount or can choose indexation)
• Investors at lower marginal rates (the 30% minimum rate may be similar to their current effective rate)

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