Key Highlights

  • From 1 July 2027, individuals lose the 50% capital gains tax discount and gain a new tax break: indexing the cost base of an asset for inflation.
  • The Tax Reform No. 1 Act 2026 is now law.
  • The holding period requirement stays the same.
  • If the test is failed, the whole nominal gain is taxed, with no allowance for inflation.

From 1 July 2027, individuals lose the 50% capital gains tax discount and gain a new tax break: indexing the cost base of an asset for inflation. Only assets held for at least 12 months qualify. That threshold already decides who gets the 50% discount, and the way the ATO counts it means a sale one day too early can cost a seller the concession. Parliament returns on 12 October with more detail of the reform still to come.

The rule that carries over into the new system

The Tax Reform No. 1 Act 2026 is now law. From 1 July 2027 it replaces the 50% CGT discount for individuals with indexation of the cost base, together with a 30% minimum tax on gains accruing from that date. Gains that accrue before then keep the 50% discount through a deemed sale at market value just before 1 July 2027.

The holding period requirement stays the same. According to MLC's technical paper of 29 June 2026, both indexation and the 50% discount require the asset to have been owned for at least 12 months. indexation requires a holding period of at least 12 months.

If the test is failed, the whole nominal gain is taxed, with no allowance for inflation. Corrs makes this point, and the minimum tax framework separately applies to resident individuals' gains from July 2027.

How the ATO counts 12 months

The counting method is set out in an ATO taxation determination, TD 2002/10, which is ATO guidance rather than legislation. It says that "both the day of acquisition and the day on which the CGT event happens must be excluded."

The ATO's own example is an asset bought on 2 February 2001. A sale on 2 February 2002 does not meet the test. A sale on 3 February 2002 does.

MLC applies the same logic to the new system. An asset bought on 2 February 2028 and sold on 2 February 2029 would not qualify for indexation. The sale would need to happen on 3 February 2029 or later.

Hypothetical example: the cost of one day

Hypothetical example: Sam buys shares on 2 February 2028 for $50,000 and sells them for $60,000. Assume consumer prices rise 3.5% between the relevant quarters, and that Sam's marginal rate, including the Medicare levy, is 32%.

If Sam sells on 2 February 2029, the 12-month test is not met. The full $10,000 gain is taxable, and the tax at 32% is $3,200.

If Sam waits one more day and sells on 3 February 2029, the $50,000 cost base is indexed by 3.5% to $51,750. The taxable gain falls to $8,250, and the tax at 32% is $2,640.