Proposed CGT changes may alter the after-tax outcome of future investment and business-asset sales making early planning increasingly important.
The Federal Government’s proposed capital gains tax reforms represent a significant potential shift in the way Australians are taxed on investment and business gains. While the final legislation and its precise operation remain subject to the parliamentary process, the proposed direction is clear: the long-standing 50 per cent CGT discount would be replaced with an inflation-based discount, alongside a minimum 30 per cent tax on certain capital gains from 1 July 2027.
What is changing?
Under the current rules, individuals and trusts that hold an asset for at least 12 months may generally reduce a capital gain by 50 per cent before applying their marginal tax rate. The proposed reforms would instead link the available discount to inflation, rather than automatically halving the gain.
For many taxpayers, this could mean a larger taxable capital gain where an asset rises materially in value above inflation. The impact will depend on the asset’s purchase date, holding period, cost base, eventual sale price, and the taxpayer’s overall tax position.
What it means for individuals
The changes are likely to be most relevant to individuals who hold investment properties, shares, managed investments, or other long-term growth assets. A reduced CGT concession may affect the after-tax return on an investment and may influence decisions about when to acquire, retain, or dispose of assets.
The proposals are described as prospective, with the new CGT framework intended to apply from 1 July 2027. This creates an important distinction between gains realised before and after the commencement date, particularly for taxpayers already considering a sale or restructuring.
What it means for businesses
Business owners should also consider the potential effect on succession planning, sales of business premises, exits from trading businesses, and group restructures. Although the small business CGT concessions remain an important part of the tax system, access to and use of those concessions must be assessed carefully against the relevant eligibility rules.
The proposed package includes an increase in the aggregated turnover threshold for the small business 50 per cent active asset reduction, from $2 million to $10 million. This may broaden access to that particular concession, but it does not remove the need for detailed advance planning.
Planning now
The practical message is not to rush into a transaction solely because reforms have been announced. Instead, taxpayers should ensure they have reliable acquisition records, updated cost-base calculations, and a clear understanding of their expected transaction timetable.
A review undertaken now can help identify whether an intended sale, transfer, or restructure may be affected by the proposed rules. Given that CGT outcomes can differ substantially between individuals, trusts, companies, and business owners, advice should be tailored well before contracts are exchanged.
