By Amit Aggarwal · FCPA, SSA® · Life Beyond Numbers · May 2026
Australia’s 50% CGT discount is about to change for the first time in 27 years. The AFR has run it on the front page: “Super funds set to avoid CGT change.” If you own investment property, are planning to buy, or run an SMSF, here is exactly what that headline means for you.
What’s actually changing with the 50% CGT discount
For 27 years, Australians investing in property, shares, and other assets have benefited from a 50% capital gains tax discount. Hold an asset for more than 12 months, sell it, make a $400,000 gain, and only $200,000 goes into your tax return. Simple. Effective. For a high-income earner at the top marginal rate of 47%, that’s the difference between a $188,000 tax bill and a $94,000 one.
That’s about to end for new purchases.
Labor is expected to announce in the May 12 budget that the 50% discount will be abolished for assets acquired after a cut-off date, most likely 12 May 2026 or 1 July 2026 (details to be confirmed in legislation). Existing investment properties held before that date are expected to be grandfathered, meaning your current portfolio should not be affected.
What replaces the discount? The indexation method. An approach that last applied in 1985, and that most investors under 50 have never had to think about.
A short history: why we had a 50% CGT discount in the first place
When Paul Keating introduced capital gains tax in 1985, the rules were built around inflation adjustment. The principle was sound: you should only pay tax on real gains, not the portion of your profit that was simply inflation keeping pace with itself.
So instead of halving your gain, you indexed your cost base. You multiplied what you paid by the CPI increase over the entire holding period. Only the gain above that inflation-adjusted cost base was taxable.
It worked reasonably well when inflation was running hot. When John Howard replaced it with the 50% discount in 1999, the goal was simplicity and to stimulate long-term investment. For most property investors since, the discount has been the better deal, primarily because Australian property has consistently grown faster than inflation. The CPI adjustment doesn’t close the gap enough to beat a flat 50% cut.
Now we’re going back. And for high-income earners in Melbourne’s property market, the numbers are not flattering.
The Melbourne example: how much extra tax under the new rules?
A professional buys an investment property after the cut-off date at $700,000. Ten years later, they sell for $1,400,000, a 100% gain. Melbourne has averaged this kind of growth over long horizons. It’s not heroic. It’s history.
| Structure | Taxable Gain | Tax Payable |
|---|---|---|
| Personal name (old rules) 50% discount applied |
$350,000 | $164,500 |
| Personal name (new rules) Indexation method, ~3% avg CPI |
$459,200 | $215,824 |
| SMSF (accumulation phase) 33% discount retained |
$469,000 | $70,350 |
| SMSF (pension phase) Zero tax on gains |
$700,000 | $0 |
Figures illustrative only. Actual outcomes depend on individual circumstances, fund balance, contribution history, and final legislation. Indexation calculation assumes ~3% average CPI compounded over 10 years.
For this investor, the indexation method costs roughly $51,000 more in tax. On one property. For a professional holding two or three investment properties over a working career, this is a material wealth event.
What’s protected, what’s exempt, and what’s still unclear
Likely protected (grandfathered)
- Existing investment properties purchased before the cut-off date should retain the current 50% discount rules.
- Negative gearing is expected to be restricted to two investment properties for new purchases only.
Still unclear
The treatment of trust structures. We have had multiple conversations with industry advisers and there is no clear consensus yet. If you own or are considering property in a family discretionary trust, do not move until legislation is released. Get advice specific to your situation.
Confirmed via AFR reporting
SMSFs are expected to be exempt from the changes. Super funds retain their existing CGT treatment: the 33% discount in accumulation phase and zero tax in pension phase.
We have been saying for years that SMSF property is underutilised by high-income professionals. This budget, if it lands as expected, turns that from a useful option into the obvious structural play for anyone building a property portfolio from scratch.
The government has explicitly designed this exemption to protect superannuation as a retirement savings vehicle. That policy intent is clear. For high-income professionals with the right income structure and fund balance to support SMSF borrowing, this is the moment to act, not wait.
What to do now: four scenarios
If you own existing investment properties
Get clarity on your grandfathering position before May 12. Don’t assume. Get it confirmed in writing from a registered tax agent.
If you are planning a new purchase after the cut-off
The structure question is no longer optional. Personal name, trust, or SMSF: each has materially different tax outcomes under the new rules, and the gap just widened significantly.
If you are already in an SMSF and haven’t considered property within it
The barrier isn’t the structure. It’s knowing how to borrow within the fund and select the right asset. That’s a solvable problem. See our 5 steps to your SMSF for the foundation, and our SMSF property investment guide for the specifics.
If you are uncertain about trust structures
Wait. The legislation isn’t drafted yet. Moving before the rules are clear is a risk not worth taking.
Frequently Asked Questions
When does the 50% CGT discount change take effect?
The change is expected to be announced in the May 12, 2026 federal budget, with a cut-off date most likely set for 12 May 2026 or 1 July 2026. Final dates will be confirmed in legislation.
Will my existing investment property lose the 50% CGT discount?
Existing properties purchased before the cut-off date are expected to be grandfathered, meaning they should retain the current 50% discount rules. Confirm your position in writing with a registered tax agent before relying on this.
Are SMSFs affected by the CGT changes?
No. SMSFs are expected to be exempt. Super funds retain the 33% CGT discount in accumulation phase and zero tax on capital gains in pension phase.
What is the indexation method for capital gains tax?
The indexation method calculates your taxable capital gain by multiplying your original cost base by the increase in CPI over your holding period. Only the gain above that inflation-adjusted cost base is taxable. It was the standard method between 1985 and 1999, before the 50% CGT discount replaced it.
Will negative gearing also be restricted?
Negative gearing is expected to be restricted to two investment properties for new purchases only. Existing arrangements are expected to be grandfathered.
How are family trust structures affected?
The treatment of family discretionary trusts under the new rules is not yet clear. If you own or are considering property in a trust, wait for legislation before making structural changes.
Should I rush to buy property before the cut-off date?
Buying property to beat a deadline is rarely a good standalone reason. The right structure for your situation matters more than the timing. Speak with a registered tax agent and licensed adviser before committing.
General Information Only: This article provides general information and does not constitute financial, tax, or legal advice. Tax outcomes depend on individual circumstances, fund structures, and legislation that has not yet been released. All figures are illustrative only. Always consult a registered tax agent and licensed financial adviser before making any investment or structural decisions.
Want to talk through what this means for you?
Book a free 30-minute strategy call to discuss your structure, your portfolio, and your options before May 12.
Amit Aggarwal, FCPA, SSA® · Co-founder, Prosper With Property · Specialising in SMSF property acquisitions and complex lending structures for high-income professionals.
