The 30% minimum CGT rule is a significant tax reform announced in the 2026 Federal Budget that will affect Australian property investors and other asset holders.
From 1 July 2027, the government will replace the current 50% capital gains tax discount with an inflation-based cost base indexation system and introduce a minimum 30% tax on capital gains. This change means investors will pay tax on the real capital gain, excluding inflation, supporting a fairer tax system. The CGT changes apply only to gains arising after 1 July 2027. Investors in new builds will have the option to choose between the existing 50% CGT discount or the new arrangements.
For property investors, the amount of tax paid on a future sale will depend on factors such as timing, cost base records, tax depreciation schedules, inflation, and whether the property is a new build or an established dwelling. These investment decisions are critical to managing tax outcomes effectively.
Investors who bought before 1 July 2027 and sell after that date will need to apply transitional CGT rules, including rollover relief. Gains will be split between the current system and the new cost base indexation and minimum tax regime.
What is the 30% Minimum CGT Rule?
The 30% minimum CGT rule is a proposed update to Australia’s capital gains tax (CGT) framework affecting certain real capital gains.
Currently, investors who hold eligible assets for more than 12 months benefit from a 50% CGT discount, meaning only half the capital gain is included in taxable income.
From 1 July 2027, this discount will be replaced with cost base indexation, adjusting the asset’s original cost base for inflation before calculating taxable gains. A minimum effective tax rate of 30% will apply to capital gains regardless of the investor’s other income, individual circumstances, or tax bracket.
For property investors, the tax payable when selling after the reform date will depend on:
- the original purchase price and market value of the property
- the holding period and sale date
- whether the property is a new build or an established property
- how much the property’s value increased above inflation
- claimed capital works deductions and plant and equipment depreciation
- completeness of cost base and depreciation records
The key change is the 30% minimum CGT rule reduces the benefit of selling in low-income years, as a 30% tax rate applies regardless of other income or marginal tax rates.
When Would the 30% Minimum CGT Rule Start?
The 30% minimum CGT rule is set to begin from 1 July 2027.
This date is important as the reform will not apply uniformly to all property sales. The Budget confirms CGT changes will only apply to gains arising after 1 July 2027.
Investors should consider three main scenarios:
Property Scenario | Likely CGT Treatment |
|---|---|
Bought and sold before 1 July 2027 | Current CGT rules apply, including the 50% CGT discount where eligible |
Bought before 1 July 2027 and sold after 1 July 2027 | Transitional CGT rules apply, requiring gain apportionment |
Bought and sold after 1 July 2027 | New CGT rules apply, including cost base indexation and the 30% minimum CGT rule. |
Investors owning properties before 1 July 2027 who plan to sell after that date will need to split their capital gain between the pre- and post-reform periods.
Final legislation and draft legislation will clarify details, so investors should avoid decisions based solely on proposals.
How Would the 30% Minimum CGT Rule Work?
The 30% minimum CGT rule changes how capital gains are calculated and taxed from 1 July 2027.
Currently, investors calculate their capital gain, apply the 50% CGT discount if the asset has been held for more than 12 months, then include the discounted gain in taxable income.
Under the new system, investors will adjust the asset’s cost base for inflation using cost base indexation. The real capital gain equals the sale price minus the indexed cost base. A minimum 30% tax rate then applies to this real gain.
For example, an investor buying a rental property after 1 July 2027 and selling later will pay tax on the gain above inflation.
The 30% minimum tax may reduce benefits of selling in low-income years.
Step | Explanation |
|---|---|
1. Determine sale price | Amount received from selling the investment property |
2. Adjust cost base | Original cost base increased for inflation |
3. Calculate real capital gain | Sale price minus indexed cost base |
4. Apply tax | Minimum 30% tax rate applies to the real gain |
Factors affecting tax include:
- indexed cost base
- real capital growth
- purchase and sale dates
- capital improvements and renovations
- claimed capital works deductions and plant and equipment depreciation
- transitional rules for pre-2027 purchases
- whether the property qualifies as a new build
Keeping detailed tax depreciation schedules is essential to track claims affecting the cost base.
30% Minimum CGT Rule vs the 50% CGT Discount
The 30% minimum CGT rule differs significantly from the current 50% CGT discount.
Currently, investors reduce gains by half if held over 12 months, then pay tax at their marginal rate.
From 1 July 2027, this discount will be replaced by cost base indexation, and a minimum 30% tax will apply on gains.
Feature | Current CGT Discount | Proposed 30% Minimum CGT Rule |
|---|---|---|
Tax benefit | 50% discount on capital gain | Inflation-adjusted cost base |
How gain is reduced | Half gain disregarded | Cost base indexed for inflation |
Tax rate applied | Marginal tax rate | Minimum 30% tax on real gain |
Investor risk | Large taxable gain after growth | Limited benefit from selling in low-income years |
Records needed | Purchase price and cost base | Cost base, depreciation schedules, transitional records |
The current system is simpler. For example, a $300,000 gain becomes $150,000 taxable.
Under the new system, taxable gain depends on inflation and the indexed cost base. If growth exceeds inflation, gains remain significant.
Some investors may benefit from indexation when inflation is high, but most will need better records.
Who Could Be Affected by the 30% Minimum CGT Rule?
The rule affects investors selling certain CGT assets after 1 July 2027, especially where gains arise post-reform.
For property investors, this mainly concerns investment properties not covered by the main residence CGT exemption.
Affected groups include:
- Property investors selling after 1 July 2027
- Landlords holding assets, held or vacant land
- Investors who bought before 1 July 2027 and sell after
- Those relying on low-income years to reduce CGT
- Individuals, discretionary trusts, and partnerships with taxable gains
- Investors with incomplete cost base or depreciation records
- Those claiming capital works deductions for renovations
The rule is less relevant for family homes covered by the main residence CGT exemption.
Caution applies if a property was used partly for private and income purposes, such as a former home now rented.
The impact is greatest where property values rose well above inflation.
What Happens to Properties Bought Before 1 July 2027?
Properties bought before 1 July 2027 and sold after face transitional CGT rules.
Gains may be split between:
Period | Tax Treatment |
|---|---|
Before 1 July 2027 | Current CGT rules with 50% discount |
After 1 July 2027 | New CGT rules with indexation and 30% minimum tax |
For example, a property bought in 2022 and sold in 2030 requires gain apportionment.
Investors need clear evidence of:
- purchase price and date
- stamp duty and legal fees
- renovation and improvement invoices
- claimed capital works deductions and plant and equipment depreciation
- selling costs and rental history
A detailed tax depreciation schedule supports accurate CGT calculations.
Why Cost Base and Depreciation Records Are More Important
Accurate cost base and depreciation records are vital under the new rules.
The cost base includes purchase price plus eligible costs such as stamp duty, legal fees, improvements, and selling expenses.
Tracking these costs is crucial for cost base indexation, transitional rules, and gain splits.
Key records include:
- sale contract and settlement statements
- stamp duty and legal fees
- renovation and improvement invoices
- building and construction records
- selling agent fees and advertising costs
- tax depreciation schedules detailing capital works deductions and plant and equipment depreciation
Good records prevent errors like missing costs or double-counting.
A professional tax depreciation schedule helps identify deductions and supports cost base accuracy.
How Could the 30% Minimum CGT Rule Affect Selling Decisions?
The rule may affect when investors sell properties.
Currently, selling in low-income years can reduce CGT through negative gearing benefits.
The 30% minimum tax reduces this benefit by applying a tax floor regardless of income.
Investors should consider:
- sale timing relative to 1 July 2027
- property growth versus inflation
- gain apportionment before and after reform
- whether the property is new or established
- which tax method yields better results
- completeness of depreciation and cost base records
Consult a registered tax adviser before making decisions.
Example: How the 30% Minimum CGT Rule Could Change a Property Investor’s Tax Position
Example:
Item | Amount |
|---|---|
Purchase price | $600,000 |
Sale price | $900,000 |
Nominal capital gain | $300,000 |
Current 50% CGT discount gain | $150,000 taxable |
Proposed indexation outcome | Depends on inflation and rules |
Minimum tax rate | 30% minimum tax on real gain |
Under current rules, $300,000 gain with 50% discount results in $150,000 taxable gain.
Under new rules, cost base adjusts for inflation, possibly lowering taxable gain. But if growth exceeds inflation, the 30% minimum tax applies.
Tax depends on purchase and sale dates, inflation, renovations, claimed capital works deductions, plant and equipment depreciation, and transitional rules.
Accurate records and advice are essential.
How Property Investors Can Prepare Before 1 July 2027
Investors should prepare by organising their records and understanding their portfolio.
Steps:
- review purchase contracts and settlements
- organise renovation and improvement invoices
- keep evidence of stamp duty, legal fees, and selling costs
- verify capital works deductions and depreciation claims
- retain tax depreciation schedules
- consult a registered tax adviser before selling or restructuring
- monitor legislation progress, including budget night announcements
A tax depreciation schedule helps identify deductions and supports cost base calculations.
Good record-keeping reduces risks and aids decision-making.
If you lack a current depreciation schedule, seek professional help to maximise deductions and simplify tax planning.
The 30% Minimum CGT Rule Makes Tax Records More Important
The 30% minimum CGT rule will change how property investors calculate and plan capital gains tax from 1 July 2027.
The 50% CGT discount will be replaced by cost base indexation, with a minimum 30% tax on real gains. Tax outcomes will depend on inflation, growth, ownership dates, transitional rules, and detailed cost base and depreciation records.
This affects tax bills and how investors approach sale timing, new builds, renovations, and long-term planning.
Investors should use the lead time to organise clear records, making it easier to understand tax positions and avoid missed costs.
A thorough tax depreciation schedule is essential for tracking capital works deductions and plant and equipment depreciation.
These changes do not directly affect superannuation funds, which follow separate tax rules. However, venture capital incentives and small business CGT concessions remain relevant for other investors. Understanding asset acquisition dates and market values is crucial under the new indexation system, replacing the 50% discount. Investors should seek professional advice to navigate these changes and ensure compliance with the new rules starting 1 July 2027.
If you own investment property, get a free quote today on a tax depreciation schedule. See how you can maximise deductions and support your tax strategy.
