Updated CGT Discount Rules for Property: Individuals vs Trusts

Property investors used to rely on a simple rule: hold for more than 12 months, get a 50% capital gains tax (CGT) discount if you’re an individual or trust. From 1 July 2027, that simplicity disappears. The 50% discount is effectively replaced by CPI indexation of your cost base and a 30% minimum tax on many real gains for individuals and most trusts, with complex carve‑outs for existing assets and new builds.

In plain English: if you’re buying or holding property in your own name or in a family trust, your future CGT bill on many investments is likely to be higher and more variable. Companies don’t get the 50% discount today and won’t get the new concessions either, but the relative comparison between structures changes.

This guide focuses on what has changed for individuals and trusts, how the new rules interact with the 2026–27 negative gearing reforms, and what you can do this year before you buy, restructure or sell.

Different ownership structures now face very different CGT outcomes after 2027.

1. What’s actually changing with the CGT discount?

1.1 The old rules in one paragraph

Under current law (up to 30 June 2027, based on announcement timing):

• Individuals and trusts generally get a 50% CGT discount on capital gains from assets held for more than 12 months (ITAA 1997 Div 115).
• Companies get no CGT discount but pay a lower company tax rate (currently 25% for base rate entities; check ATO for latest).
• Trusts don’t themselves get the discount – instead, eligible beneficiaries are treated as if they made the gain, then apply their own discount.

This meant long‑term, high‑growth property in personal names or discretionary trusts was very tax‑efficient.

1.2 The new framework in brief

Under the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and related Budget measures:

1. For many resident individuals and most discretionary trusts, the 50% CGT discount is replaced with:
   • CPI indexation of cost base (to strip out inflation); and
   • A 30% minimum tax on real capital gains above an allowance.
2. Many residential property losses are quarantined from 1 July 2027, so you can’t freely offset rental losses against salary and wages.
3. The reforms include:
   • Grandfathering for many existing assets; and
   • Preferred treatment for qualifying new builds to encourage supply.

Knowledge from [/insights/updated-cgt-rules-geared-property-investors-2027-playbook]: post‑2027, most individual property investors see the 50% discount replaced by indexation and a 30% minimum tax on real gains, lifting tax on long‑term growth assets.

1.3 Why individuals and trusts are squarely in the firing line

Key policy aims (per 2026–27 Budget papers):

• Target concessions (CGT discount and negative gearing) away from heavily geared established housing owned by households.
• Push capital towards new supply and more productive investments.
• Clamp down on trust streaming of heavily discounted gains to low‑tax family members.

That means:

• If you’re an individual or family trust holding established residential property, your long‑term after‑tax gain is more heavily taxed than before.
• If you hold new builds that meet the exemption rules, or property in companies or SMSFs, the relative position may improve.

For SMSFs, see the cluster guide [/insights/capital-gains-tax-changes-smsf-property-sales-strategy-timing].

2. Individuals: what happens to your 50% discount?

2.1 Three buckets of property under the new rules

For individuals, think of your portfolio in three buckets:

1. Grandfathered assets – typically properties acquired before 12 May 2026 (7:30pm Budget night), held in personal names.
2. New builds – residential property that clearly meets the ‘new residential dwelling’ and timing tests under the reforms.
3. Affected established assets – established residential properties bought on or after 12 May 2026 that don’t qualify as new builds.

Exact cut‑offs and edge cases depend on final legislation – especially what counts as a new dwelling and how substantial renovations are treated.

2.2 Indicative treatment for individuals

For a typical resident individual:

• Grandfathered assets
  Likely retain a form of 50% discount or transitional relief (e.g. opt‑in deemed disposal, blended rates). The whole point of grandfathering is to avoid retrospective tax grabs.

• New builds (qualifying)
  Budget materials and the negative gearing reforms confirm new builds are favoured: they retain access to negative gearing and likely more generous CGT outcomes than established stock.

• Established properties acquired after 12 May 2026
  These are the main losers. From 1 July 2027:

  • Rental losses are quarantined to property income and capital gains; and
  • The 50% discount is replaced by CPI indexation + 30% minimum tax on the real gain.

2.3 Worked example: individual holding an established property

Assume:

• Bought: 1 July 2027 for $800,000 (established property).
• Selling: 1 July 2037 for $1,400,000.
• Holding period: 10 years.
• CPI over 10 years: assume 2.5% per year (compounded ~28% total, rounded for illustration).

1. Old world (50% discount) – for comparison only:

   • Cost base: $800,000
   • Sale price: $1,400,000
   • Nominal gain: $600,000
   • 50% discount: taxable gain = $300,000.
   • If marginal rate = 45% + Medicare 2% ≈ 47%: tax ≈ $141,000.

2. New world (indexation + 30% minimum) – illustrative only:

   • Indexed cost base: $800,000 × 1.28 ≈ $1,024,000.
   • Real gain: $1,400,000 − $1,024,000 ≈ $376,000.
   • Minimum tax 30% on real gain: ≈ $112,800.

Under these simplified assumptions, the new regime could actually produce a lower tax bill where inflation is high and your marginal rate is high. But if:

• Inflation is low, or
• Your marginal rate is closer to 34.5% (incl. Medicare), or
• The 30% minimum is applied on a broader base than expected,

your tax could be higher than under the old 50% discount.

This is why decision‑grade modelling is essential before you buy or sell.

For a deeper portfolio‑level view under the 2027 rules, see [/insights/updated-cgt-rules-geared-property-investors-2027-playbook].