The Australian Government has announced changes to Capital Gains Tax (CGT), but there’s no need to panic.

  • The new rules won’t start until 1 July 2027,
  • You have ample time to understand what they mean and what their next steps may be.

 

What’s changing?

  • Currently, if you own an investment for more than 12 months, you can usually receive a 50% CGT discount when you sell.
  • This means only half of your capital gain is generally taxed (for eligible individuals and trusts).
  • From 1 July 2027, the 50% CGT discount will be replaced with a new method where the purchase price (cost base) of an asset will be adjusted for inflation.
  • A minimum tax rate of 30% will apply to capital gains.
  • These changes do not apply to superannuation funds.

 

The good news is that your existing investments are not affected.

  • The changes are not retrospective.
  • Any growth in your investments before 1 July 2027 will generally continue to be treated under the current CGT rules.
  • A valuation is going to need to be obtained as at 30 June 2027 for sales after that date.
  • Only gains that build up after 1 July 2027 will fall under the new system.

 

It is possible for some investors, adjusting for inflation could produce a similar, or even better outcome than the current 50% discount, depending on how long assets are held and future inflation.

 

Contact us for a chat if,

  1. You want to understand how or if you are impacted and whether you need to act.
  2. You would like to understand the changes better e.g. the inflation adjustment or the new 30% minimum tax rate.

It is very likely that it is too early to make investment decisions based solely on these tax changes, but it is a good time to consider:

  • Your long-term financial goals
  • Your investment timeframe
  • Risk tolerance
  • Diversification
  • Income needs
  • Estate planning

It is good to remember that it is never good to react to headlines, it is better to focus on making informed decisions, it is sensible to seek professional advice before making major investment or selling decisions.

 

Important Notice:

  • The information contained in this article is general in nature only and does not take into account your personal objectives, financial situation or needs.
  • You should consider whether the information is appropriate for your circumstances before acting on it and seek advice from a qualified professional.
  • Personal financial advice can only be provided after considering your individual circumstances and providing the appropriate disclosure documentation.
  • VJC Wealth accepts no liability to any party for any loss arising from reliance on this information unless it has been provided as part of a formal advice engagement