Capital gains tax on property, worked through

First: your own home is (usually) exempt

The single most important CGT fact for most Australians: the main-residence exemptionmeans the home you live in is generally fully exempt from CGT when you sell it. No tax on the gain on your own home (conditions apply — it must genuinely be your main residence, the exemption can be reduced if you rented it out or used it for business, and there are rules for land over 2 hectares). When people say “property is tax-free in Australia” this is what they're half-remembering — it's true for your home, not for investment property.

Investment property: how CGT works now

When you sell an investment property, the capital gain is broadly the sale price minus the cost base (purchase price + acquisition costs + capital improvements − depreciation claimed). That gain is added to your assessable income in the year of sale and taxed at your marginal rate — but if you've held the asset for more than 12 months, you currently get the 50% CGT discount: only half the gain is taxable.

A worked example (current rules)

• Buy an investment property for $800,000
• Sell it 8 years later for $1,250,000
• Simplified capital gain (ignoring cost-base adjustments): $450,000
• Held > 12 months → 50% discount → taxable gain $225,000
• Added to income; at a 47% top marginal rate that's roughly $105,750 of CGT

Without the 50% discount, the same gain would be taxed on the full $450,000 — roughly $211,500 at 47%. The discount is therefore worth about $105,000 in this example. That magnitude is exactly why it's the centre of the 2027 reform.

What changes on 1 July 2027

The 2026-27 Federal Budget announced the 50% discount will be replaced with:

• An inflation-adjusted indexationmethod (the cost base is uplifted for inflation so you're not taxed on purely inflationary gains), plus
• A minimum 30% tax rate on the resulting gain.
• It applies only to gains accruing after 1 July 2027 — gains up to that date keep the old treatment.
• Investors in new builds may elect to keep the existing 50% discount.
• Properties held on or before Budget night (12 May 2026) are grandfathered under existing rules.

What this practically means

• Your own home stays exempt — the main-residence exemption is untouched by this reform.
• Already hold an investment property: grandfathered. Don't sell purely to lock in the 50% discount without running the numbers — the sale itself triggers the CGT event you might be trying to avoid, and the grandfathering means you keep the old treatment anyway if you hold.
• Buying established property after the cut-off: model the exit under indexation + 30% minimum, not the 50% discount. Long holds with high inflation are treated very differently under indexation than under a flat 50% discount.
• Interaction with negative gearing: the two 2027 reforms are designed to work together — see negative gearing explained. Model both before forming a view on a purchase.