Key Highlights

  • Since capital gains tax began in September 1985, assets bought before that date have been entirely outside it.
  • Treasurer Jim Chalmers made the scope clear in his second reading speech on 28 May 2026. "These changes will apply to all CGT assets, including pre-1985 CGT assets," he said.
  • assets acquired before 20 September 1985 come into the capital gains tax system for gains that accrue from 1 July 2027.
  • Law firm Corrs Chambers Westgarth describes the mechanism as a deemed sale and reacquisition of pre-CGT assets on 1 July 2027. "This applies to all entities, including companies," Corrs says.

Since capital gains tax began in September 1985, assets bought before that date have been entirely outside it. The Tax Reform No. 1 Act 2026 ends that for growth from 1 July 2027. Holiday houses, farms and shares bought before 20 September 1985 will be taxed on gains that accrue from that date. Every dollar of growth up to 30 June 2027 stays exempt, but the start date is now less than nine months away.

What the new law does to pre-1985 assets

Treasurer Jim Chalmers made the scope clear in his second reading speech on 28 May 2026. "These changes will apply to all CGT assets, including pre-1985 CGT assets," he said.

According to technical papers from MLC and commentary from the National Tax and Accountants' Association (NTAA), assets acquired before 20 September 1985 come into the capital gains tax system for gains that accrue from 1 July 2027. Their cost base is reset to market value at that date.

Law firm Corrs Chambers Westgarth describes the mechanism as a deemed sale and reacquisition of pre-CGT assets on 1 July 2027. "This applies to all entities, including companies," Corrs says. Corrs also notes that companies otherwise keep their existing capital gains tax treatment and do not move to the new indexation model.

Growth up to July 2027 stays tax-free

The most important point for owners is that nothing is being taxed retrospectively. According to the government's Budget tax explainer, gains on assets acquired before 1985 that accrued before 1 July 2027 "remain exempt".

The deemed sale does not trigger a tax bill on 1 July 2027. Tax is payable only when the asset is actually sold or another capital gains tax event happens, and then only on the growth that accrued after the reset date. If an asset's value does not rise after the reset date, there is no post-2027 gain to tax.

Pitcher Partners has called the change "a fundamental shift" in long-standing treatment. Pre-CGT status has been valuable for long-term holders because any growth, however large, could be realised without capital gains tax.

The family home is still exempt

The main residence exemption is unchanged, according to the Budget explainer. A home bought before 1985 that is still the owner's main residence remains exempt from capital gains tax.

Partial use can complicate things. The NTAA has said people who run a business from home or rent out a room may lose part of the exemption under the new rules. It has also raised with Treasury how the exemption applies to homes acquired before 1 July 2027.

The change matters most for pre-1985 assets that are not a main residence, such as holiday homes, rental properties, farmland, business premises, shares and interests in private companies or trusts.