The shift from a flat discount to indexation
Before the 2026 Budget changes, most property investors used the 50% CGT discount — if you held a property for more than 12 months, only 50% of your capital gain was taxable. This was a flat discount regardless of inflation.
From 1 July 2027, for established residential properties purchased after Budget night (12 May 2026), the 50% discount is replaced with an inflation-adjusted cost base.
What does indexation mean in practice?
Indexation adjusts your original cost base for inflation — so the government is only taxing your real gain, not the portion of the gain that was simply caused by the rising cost of living.
Example: If you bought a property for $600,000 and inflation over the holding period was 20%, your indexed cost base becomes $720,000. If you sell for $900,000, your taxable gain is $180,000 — not the full $300,000 nominal gain.
What is the minimum 30% tax rate?
A minimum 30% tax rate applies to the indexed gain. For investors in higher tax brackets, the overall tax burden may be similar or lower compared to the old 50% discount. Your accountant can model your specific situation.
What about new builds?
Investors in new residential builds can choose at the time of sale whichever method — the old 50% discount or the new indexed cost base — gives the better result. This election is at the time of disposal.
Why your cost base records matter more than ever
To calculate an indexed gain, the ATO needs an accurate and complete cost base — including:
- Purchase price and settlement costs
- Capital improvements and renovations (with invoices)
- Depreciation claimed (which reduces cost base)
- Capital works deductions claimed
- Selling costs
Missing or inaccurate records can overstate your taxable gain significantly.
How Koste can help
Koste prepares CGT cost base reports that compile your purchase cost, capital improvements, depreciation history and capital works deductions into a single document for your accountant at the time of sale.
For the full context, see our 2026 Property Tax Changes guide.