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The hidden trap of rushing to sell your investments before next year
Australia's CGT rules are changing, but selling investments before the deadline could cost you more. Here's how the new system will affect shares, property and your tax bill.
- From 1 July 2027, inflation-adjusted capital gains will replace the 50 per cent tax discount for most affected investments.
- A new minimum tax rate of 30 per cent could leave some investors paying substantially more, while others may benefit.
- Investors who already own shares or property can retain the existing discount on gains made before July 2027, removing much of the incentive to sell early.
Australia’s capital gains tax changes have prompted concerns that investors should sell their shares or property before July 2027 to avoid paying more tax.
But rushing to sell could prove an expensive mistake.
Under the new rules, gains made before the deadline can retain the existing 50 per cent discount, even if an investment is sold years later.
From 1 July 2027, an inflation-based system will apply to most affected investments, alongside a minimum tax rate of 30 per cent on inflation-adjusted gains.
Whether investors pay more or less will depend on inflation, their income and how their investments perform.
As a finance academic, CPA and chartered accountant, I’ve reviewed the new law and examined three examples showing who stands to gain, who could pay more and why selling before the deadline may not help.
What is changing
Today, if you hold an asset for more than 12 months and sell it at a profit, you pay tax on only half the gain, or a 50 per cent discount. From 1 July next year, that will be replaced.
Under the new rules, the original cost of an investment, along with eligible buying and selling expenses, will be adjusted for inflation. This means investors will pay tax only on the increase in value above inflation, rather than the full gain, with a minimum tax rate of 30 per cent.
The 12-month rule stays. The ATO says companies, super funds, and the family home are not affected, and investors in newly built homes or affordable housing can choose to keep the old discount.
Under the new system, investors will pay at least 30 per cent tax on their inflation-adjusted capital gains, even if their usual tax rate is lower.
Those on higher tax rates will continue paying their normal marginal rate. However, people receiving the Age Pension, JobSeeker or certain other government payments will be exempt from the minimum rate in that year.
The three examples below use the tax rates legislated for 2027-28 and assume they still apply when the asset is sold. They ignore the Medicare levy and tax offsets, which shift the dollars a little but not the pattern.
Case 1: A high earner buys shares
Take Sam, who pays the top marginal tax rate of 45 per cent. He buys $100,000 worth of shares in July 2027 and sells them five years later for $150,000, making a capital gain of $50,000.
Under the old rules, the 50 per cent capital gains tax discount reduces his taxable gain to $25,000, leaving him with a tax bill of $11,250, excluding the Medicare levy.
Under the new rules, it depends on inflation. The Reserve Bank aims for 2 to 3 per cent, but prices rose 4.3 per cent in the year to September 2026.
Only inflation recorded after July 2027 is considered, but an annual inflation rate of 4 per cent is not unrealistic. If inflation averages 2.5 per cent a year over five years, Sam’s original $100,000 investment would be adjusted to approximately $113,000.
That leaves a taxable capital gain of about $37,000 and a tax bill of roughly $16,600 at his marginal rate of 45 per cent. If inflation averages 4 per cent, his taxable gain falls to about $28,000, reducing his tax bill to approximately $12,750.
Sam would pay more tax under the new system in both scenarios. For indexation to leave him better off than the old 50 per cent discount, inflation would need to average more than 4.6 per cent a year over the five years he owned the shares.
Case 2: a retiree with the same shares
Maria is a self-funded retiree earning $30,000 a year in taxable income, with no Age Pension. She makes a $50,000 profit from selling shares.
Under the old rules, half her gain is taxable, leaving her with a tax bill of about $5,100.
Under the rules, her tax bill would rise to about $11,058 if inflation averaged 2.5 per cent over five years, or $8,500 if inflation averaged 4 per cent.
That’s because a minimum tax rate of 30 per cent would apply to her inflation-adjusted gain, even though her usual tax rate is lower.
For Maria, the minimum tax rate matters more than the inflation adjustment.
Case 3: a property bought in 2015
Wei, who sits at the top of the tax bracket at 45 per cent, bought an investment property for $500,000 in 2015. By July 2027, it is worth $900,000. He sells it five years later for $1.1 million, making a total profit of $600,000.
Under the old rules, Wei would receive a 50 per cent capital gains tax discount, leaving him with a tax bill of $135,000.
Under the rules, the $400,000 gain made before July 2027 would still qualify for the discount. But the remaining $200,000 would be adjusted for inflation.
If inflation averaged 2.5 per cent over those five years, Wei’s total tax bill would fall to about $126,800. At 4 per cent inflation, it would drop further to about $92,300.
Unlike some investors, Wei would benefit from the change because inflation reduces the taxable portion of his property’s growth after July 2027.
Should you sell before July 2027?
For investments affected by the changes, the law effectively draws a line at 1 July 2027.
Gains made before that date can retain the existing 50 per cent discount, even if the investment is sold years later.
That means selling early generally won’t reduce the tax owed on those earlier gains. Instead, it could bring forward the tax bill and leave investors facing additional transaction costs.
The traps are mostly paperwork. You will need a defensible market value at 1 July 2027, so keep statements and consider a valuation for property.
The ATO has promised guidance, and Treasury has drafted an alternative formula for those without a valuation, though it is not yet final. A further bill, covering trusts and more complex cases, is still before Parliament.
So will you pay more or less?
Investors could pay more tax on fast-growing assets or if their income is low enough for the minimum tax rate to apply, while those holding slower-growing investments for years could pay less.
Ultimately, it comes down to inflation, your income, and how much your investment has grown.
Dr Pedram Nourani is an Assistant Professor of Finance at SP Jain School of Global Management, Sydney.
The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website, you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.
Topics: Investing, Investment, Shares, Tax