Existing capital gains are protected under the proposed 1 July 2027 CGT changes, so investors may not need to sell before the deadline.
From 1 July 2027, the way capital gains are taxed for individuals, trusts and partnerships is set to change. The 50% CGT discount will be replaced by cost base indexation and a new 30% minimum tax on real gains.
Many people assume they must sell before the deadline to keep the discount, but this is not the case.
Your gains so far are protected
The new legislation treats assets you hold on 30 June 2027 as sold at market value on that date and bought back the next day. You do not pay any tax then. Instead, the gain built up to 1 July 2027 is locked in and keeps the 50% discount whenever you actually sell. Only the growth after that date falls under the new indexation and minimum tax rules.
In short, holding past the deadline does not cost you the discount you have already earned. This is why a number of advisers describe rushing to sell purely to beat the deadline as one of the more expensive mistakes investors make during tax reform.
Reasons to be cautious
Some assets are not affected at all. New builds can still choose the discount, and qualifying affordable housing keeps its existing discount of up to 60%. The small business CGT concessions remain. Income support recipients are exempt from the 30% minimum tax.
Also note that super is unaffected, meaning super funds continue to receive the one-third CGT discount on capital gains.
The bottom line
For most people, there is no need to sell simply because the rules are changing. The gain you have made up to 1 July 2027 stays on the old rules. The decision to sell should rest on your own plans, your asset, your income and your timeframe, not on the calendar.
Are you considering selling an asset before 1 July 2027?
The proposed CGT changes do not necessarily mean you should sell an investment before the deadline. Your decision should take into account the asset’s current value, the gain accumulated to date, your income, investment objectives and intended timeframe.
Before selling property, shares or another CGT asset, speak with Stratogen Accounting. Our experienced accountants and advisors can help you understand how the proposed rules may apply, compare the potential tax outcomes and make an informed decision about the timing of a sale.
Based in Noosa, our experienced team of accountants and business advisors support clients throughout the Sunshine Coast and Australia-wide. From tax compliance and bookkeeping to strategic planning, risk management and long-term wealth creation, Stratogen is here to strengthen your financial position and support your success.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.