Everyone heard about negative gearing in the May budget. Fewer people noticed the second change, and it might be the bigger one.
The 50 percent capital gains tax discount is going.
The old system
Until now, hold an investment property for more than 12 months and only half your capital gain was taxed. Made $200k on a sale? You paid tax on $100k at your marginal rate. Simple, generous, and a big part of why property investing worked the way it did.
The new system
From 1 July 2027, that flat 50 percent discount for individuals, trusts and partnerships gets replaced with two things.
Cost base indexation. Your purchase price gets adjusted for inflation, so you're only taxed on the real gain, not the part that's just inflation.
A 30 percent minimum tax rate on capital gains. So low income years no longer create cheap exit windows, and high earners pay their marginal rate on the real gain.
New builds get a choice between the old and new method. Established property doesn't.
The transition detail that matters
The new rules only apply to gains that accrue after 1 July 2027. Everything you've made up to that date is treated under the old rules, which means property values as at that date become the line in the sand.
Practically, that means valuations at mid 2027 are going to matter a lot, and the ATO will provide a formula for estimating where a valuation isn't done.
What it changes for buyers
Whether the new maths works better or worse for you depends on inflation, your holding period, and your tax bracket. In high inflation periods, indexation can actually beat the old discount. In low inflation, it's usually worse.
The bigger point is this. The lazy version of property investing, where tax concessions papered over a mediocre asset, is finished. Under the new rules, the quality of the actual asset, its real growth above inflation, is nearly everything.
Which means buying the right property in the right location just became more important, not less.
This is general information only, not tax advice. Get your accountant across your numbers before you buy or sell.
And if asset selection is now the whole game, get selection help from someone who knows your target market at street level. Converta matches you with a vetted buyer's agent who specialises in exactly what you're buying. Free, no obligation, first call within 24 hours.
Sources: ATO, 2026-27 Federal Budget.