47% CGT: 3 Workarounds Investors Are Already Talking About
The government is replacing the 50% capital gains discount with inflation-adjusted indexation, and limiting negative gearing to new properties. We walk through the numbers so you don’t have to.
For twenty-five years, one rule shaped how Australians built wealth through property and shares: the 50 per cent capital gains tax discount. Sell an investment you’d held for more than a year, and only half the profit counted as taxable income. It was generous. It was simple. And as of the 2026–27 Federal Budget, it’s being phased out.
Starting 1 July 2027, the government will replace the 50% discount with something called cost-base indexation: a method that adjusts your original purchase price for inflation before calculating your profit. A 30% minimum tax rate on those gains will also apply.
At the same time, negative gearing (the ability to offset rental losses against your wage income) will be restricted to new properties only.
The intent, the government says, is to direct investor incentives toward building new housing supply rather than bidding up existing homes.
Whether you agree with that policy goal or not, the practical question is the same: how do these changes affect your investments, and what can you legally do about it?
“The same economic gain can produce very different tax bills depending entirely on how the investment is owned.”
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First, what actually changed?
Let’s be precise about what was announced, because media coverage has been uneven.
- CGT discount replaced: The 50% capital gains discount will be replaced by cost-base indexation (your purchase price adjusted for CPI inflation) for assets held more than 12 months. This applies to shares, property, crypto, and most other growth assets.
- 30% minimum tax: Even if your marginal tax rate is low in a given year, a minimum 30% tax will apply to capital gains realised after 1 July 2027.
- Negative gearing restricted: Investors who buy established residential properties after Budget night (12 May 2026) will no longer be able to offset rental losses against wage income. They can still carry losses forward to offset future rental income.
- New builds are different: Investors in eligible new residential properties can choose between the old 50% discount or the new indexation method, whichever is better. Negative gearing on new builds is also retained in full.
There are also important protections for existing investors. Properties you already own, or bought before 7:30pm AEST on 12 May 2026, are grandfathered under the old rules until you sell them. Gains accumulated before 1 July 2027 on existing assets will also retain the 50% discount treatment.
One important caveat: this legislation has not yet passed Parliament. It will require negotiation with the crossbench and Opposition. Some details, particularly around what exactly qualifies as a “new build,” are subject to further consultation and may change.
Understanding the new tax calculation
Before we get to strategies, it’s worth understanding what the new system actually does to your tax bill. A lot of people hear “indexation” and glaze over. The concept is simpler than it sounds.
Under the old system (the 50% discount)
You bought an investment property for $800,000. You sell it ten years later for $1,200,000. Your nominal gain is $400,000. Under the old rules, you’d only pay tax on half of that ($200,000), regardless of how much of that gain was just inflation.
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Under the new system (indexation)
Indexation adjusts your original purchase price upward by CPI inflation over the holding period. This is meant to strip out the inflation component and tax only your real gain. Whether it’s more or less generous than the old 50% discount depends on how much the asset actually grew versus how much inflation ran. In high-growth environments, the new system can produce larger taxable gains than the old one.
In this example the outcomes look the same, because we engineered it that way for simplicity. The critical point: if your asset grew faster than inflation (which good investments usually do), the new indexation method will produce a higher taxable gain than the old 50% discount. Government Treasury modelling confirms this for investors with returns above roughly 5% annually.
And remember: a 30% minimum tax now applies regardless of your income in the year you sell. You can no longer time a sale for a low-income year to reduce your CGT below 30%.
Three ways investors may still reduce the tax hit
Given these changes, what legal options remain for investors trying to avoid having gains taxed at the personal top rate of 47%? There are broadly three.
Option 1: Hold investments through a company
When an investment is owned by a company rather than in your personal name, the gain is taxed inside the company first, at the corporate rate, not at your personal marginal rate.
Australian companies generally pay tax at 30%. Smaller companies with less than $50 million in aggregated turnover and meeting certain conditions may qualify for the lower 25% rate. A passive investment company may or may not meet those conditions, so get specific advice.
The important catch: the money is still sitting inside the company. If you pay it out to yourself as a dividend later, your personal tax comes back into play. Franking credits help reduce double-taxation, but the company structure works best when you plan to reinvest profits into the next deal, not spend them on personal expenses.
Companies also don’t get access to the individual CGT discount (50% or otherwise), so the whole gain is taxable inside the company. But for active investors (people who are repeatedly buying, renovating, subdividing, or flipping) the ATO may already be treating that activity as a business rather than passive investing. In that case, a company can cap the first layer of tax at 25 to 30% rather than it flowing straight to a personal 47% rate.
Option 2: Hold investments through an SMSF
A Self-Managed Super Fund is a different beast. Money inside superannuation is taxed under entirely separate, concessional rules.
If the SMSF is in pension phase (the fund is paying retirement income), some earnings may be taxed at 0%, subject to transfer balance cap rules.
The catch is significant: this is retirement money. You cannot sell an SMSF property and use the proceeds for a holiday, a car, or your child’s school fees. Funds are locked inside the superannuation system until you meet a formal condition of release (typically retirement at preservation age). SMSFs also come with strict compliance obligations, annual auditing costs, and complex rules around borrowing (Limited Recourse Borrowing Arrangements) and related-party transactions.
An SMSF suits patient, long-term investors building retirement wealth. It does not suit active traders, renovators, or anyone who needs personal access to the cash.
Option 3: Buy eligible new residential property
This is the most significant property-specific carve-out in the new rules, and the one the government most clearly intends investors to use.
Investors who buy eligible new builds get to choose which CGT method to apply when they sell: the old 50% discount or the new indexation method, whichever produces the lower tax bill. They also retain full negative gearing (deducting rental losses against wage income).
The real advantage of the new build concession shows up in high-growth scenarios, where the 50% discount produces a lower taxable gain than indexation, and the new build investor can simply elect to use it.
The comparison in full
Here is how the same nominal gain of $400,000 looks across different ownership structures, using the taxable gain after each method’s adjustments.
| Ownership Structure | Taxable Gain | Tax Rate | Tax Payable |
|---|---|---|---|
| Personal name, top bracket (established property) | $200,000 | 47% | $94,000 |
| Personal name, new build (using 50% discount) | $200,000 | 47% | $94,000 |
| Company | $400,000 (no discount) | 30% | $120,000 * |
| SMSF, accumulation phase | $267,000 (⅓ discount) | 15% | $40,000 |
| SMSF, pension phase | Potentially exempt | 0–15% | $0–$40,000 |
* Company tax is a first-layer only. Dividends paid from the company to the individual may attract additional personal tax, partially offset by franking credits. The apparent “higher” company tax in this table reflects that companies receive no CGT discount on the full gain. The net position depends on whether profits are retained or distributed.
What actually qualifies as a “new build”?
This is where investors need to be especially careful, and where the article you may have read elsewhere probably underplays the restrictions.
Based on Budget materials and government fact sheets, an eligible new build must genuinely add to housing supply. The examples given include:
- Dwellings constructed on previously vacant land
- Off-the-plan apartments in new developments
- Knock-down rebuilds that increase the number of dwellings on the site
- Granny flats built adjacent to an existing property (adds supply)
- Properties that haven’t previously been sold, or were only held by the builder and unoccupied for less than 12 months
- A knock-down rebuild that simply replaces one dwelling with one new dwelling (no net supply added)
- A renovation or substantial extension to an existing property
- Established properties being bought “second-hand” by a later investor. The new build concession goes to the first investor buyer, not subsequent ones.
That last point is critical and widely misunderstood: if you buy a new apartment from someone who already bought it off-the-plan, you do not get the new build concession. It belongs to the first investor. Precise definitions are still being worked through in consultation, so confirm eligibility with a tax professional before purchasing.
What about shares, ETFs, and crypto?
The CGT indexation change applies to virtually all assets: shares, ETFs, cryptocurrency, and other growth investments, not just property. The 50% discount will be replaced by indexation across the board.
The negative gearing restriction, however, is property-specific. Shares and other asset classes are unaffected by the negative gearing change.
For share and ETF investors, the same structural logic applies: holding in personal name at your top marginal rate will become more expensive than it was under the old 50% discount. A company or SMSF may be worth considering for those building large portfolios, though each comes with its own trade-offs.
The mistake to avoid
Tax efficiency is worth pursuing. But history shows that investors who let tax considerations drive purchase decisions often end up with bad investments in tax-friendly wrappers.
“A tax benefit doesn’t fix a bad purchase. Some new builds are overpriced. Some have weak resale markets. A concession on a bad deal is still a bad deal.”
The right sequence is: choose the right investment first, then optimise the structure. Not the other way around.
New builds can be genuine opportunities. But off-the-plan apartments in oversupplied markets, developments in areas with weak demand, or projects with body corporate or construction-quality risks can still destroy returns regardless of their tax treatment.
A note on what isn’t settled yet
It bears repeating: these are Budget announcements, not law. Legislation has not yet been released. The government will need to negotiate with the Senate crossbench and Opposition to pass these measures. Key definitions, including the precise scope of what counts as an eligible new build and how the 30% minimum tax interacts with existing tax arrangements, are still subject to consultation and may change.
About to make an offer? Get an independent PropCred Pre-Purchase Report with price guidance, rental returns and a clear buy-or-don’t-buy recommendation.
Decisions about restructuring your investments, moving assets into a company or SMSF, or changing your property buying strategy should not be made solely on the basis of what has been announced. Get specific, professional advice before acting.
The simple summary
Australia’s investment tax landscape is changing materially from 1 July 2027. The key points for investors:
- The 50% CGT discount is being replaced by inflation-adjusted indexation, and a 30% minimum tax applies to all gains from 1 July 2027.
- Negative gearing on established residential properties bought after Budget night is being restricted. Losses can no longer offset wage income.
- New builds retain both negative gearing and the choice between the old 50% discount and the new indexation method.
- Holding investments through a company can cap first-layer tax at 25–30%, but profits are still inside the company.
- An SMSF can be highly tax-efficient for long-term retirement wealth, but access to funds is restricted until retirement.
- Properties you already own before Budget night are grandfathered. Gains before 1 July 2027 are also protected under current rules.
- This legislation is not yet passed. Consult a professional before changing your investment structure.
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