What the 2026 CGT Discount Reform Means for Australian Business Owners

The 50% CGT discount is gone. Here's what changed, who it affects, and how to make sure a bigger tax bill doesn't blindside your business.

Key dates at a glance: The reform was announced 12 May 2026 (Budget night). The new CGT regime takes effect from 1 July 2027. The trust minimum tax applies from 1 July 2028. 

Note: legislation has not yet passed Parliament.

The Biggest Tax Change in 25 Years Is Now Real

On 12 May 2026, Treasurer Jim Chalmers handed down a Federal Budget he described as "the most important and ambitious in decades." The centrepiece was the removal of the 50% Capital Gains Tax (CGT) discount — a concession that has shaped how Australians invest in property, shares, and business assets since 1999.

From 1 July 2027, the rules change. For many business owners, investors, and trust holders, the tax bill on an asset sale could be substantially larger than anything they have planned for. The time to understand your position is now — not after the legislation passes.

This article breaks down exactly what changed, who is affected, and what your business finance options look like when the bill arrives.

Why This Happened

The equity argument behind the reform is stark: in 2022-23, the top 10% of income earners received 83% of the CGT concession benefit. The top 1% alone received more than half of it. Treasury framed the change as restoring intergenerational fairness and redirecting tax support toward productive investment and new housing supply.

What Has Changed: The New Rules Explained

Before the reform, if you sold an asset held for more than 12 months, you only paid tax on half the nominal gain. The other half was untaxed. From 1 July 2027, that flat 50% is replaced by two new mechanisms. The ATO's official guidance and the Budget's own tax reform page confirm the changes as follows:

1. Cost Base Indexation

The cost base of your asset is adjusted upward in line with inflation (CPI) for the period it was held after 1 July 2027. You only pay tax on the real gain — the appreciation above and beyond what inflation accounts for. If your asset barely outpaces inflation, the taxable gain could be small. If it grows strongly in real terms, you pay on the full real gain.

2. A 30% Minimum Tax Floor

Once your inflation-adjusted gain is calculated, a minimum 30% effective tax rate applies regardless of your marginal income tax rate. Even if you are in the 16% bracket, capital gains are taxed at a minimum of 30%. For those in the top 47% bracket, their marginal rate applies as it always did — but the 30% floor closes the loophole for low-income earners who previously paid minimal CGT on large investment gains.

The Key Trigger Date

Assets purchased after 7:30pm AEST on 12 May 2026 (Budget night) are subject to the new CGT regime for all gains from 1 July 2027 onward. Assets held before that time retain the 50% discount for gains accrued up to 30 June 2027. Any gain after that date — even on an asset you bought in 2010 — falls under the new rules. The official Budget factsheet includes worked examples of how the transitional split is calculated.

Who Is Most Affected?

Property investors buying established dwellings

If you buy an established investment property after Budget night, two changes hit you simultaneously. The 50% CGT discount is replaced by indexation and the 30% floor when you eventually sell. Negative gearing on the property is also restricted from 1 July 2027 — rental losses can no longer reduce your wage income; they can only be offset against other residential rental income or carried forward. Together, these changes significantly reduce both the annual and long-term after-tax return on established investment property purchased going forward.

Who Is Not Affected on Negative Gearing

Properties purchased before Budget night are grandfathered under the old negative gearing rules indefinitely, for as long as you own them. For CGT, only gains accruing after 1 July 2027 fall under the new regime — even for pre-Budget properties.

New build property investors

Investors in newly constructed homes are treated more favourably under the reform. They retain the ability to choose between the old 50% CGT discount or the new indexation approach — whichever produces a better outcome at the time of sale. Full negative gearing is also retained for new builds. This is a deliberate policy incentive to channel investment toward new housing supply rather than existing stock.

Business owners selling assets

If your business has accumulated assets over time — commercial property, plant and equipment, or the business itself — the removal of the 50% discount means a larger portion of your proceeds will be taxable. The ATO's CGT calculation guide remains a useful reference for working through your specific scenario. Small business CGT concessions (50% active asset reduction, retirement exemption, 15-year exemption) remain in place for eligible businesses — but if your business falls outside those thresholds, the new rules apply in full.

Discretionary trust holders

A third reform that has received less attention but is arguably the most significant for structured businesses: from 1 July 2028, discretionary trusts face a 30% minimum tax on all trust taxable income — not just capital gains. If you hold investment properties, a business, or shares in a discretionary trust, your structure needs to be reviewed. Corrs Chambers Westgarth's analysis notes that in certain scenarios, effective tax rates on trust distributions could reach levels that make some structures unworkable. Rollover relief for restructuring runs for three years from 1 July 2027.

Startup founders and equity holders

Startup equity — shares, options, employee share scheme interests — is also subject to the new CGT regime. Founders who built company value over years and planned to benefit from the 50% discount on an acquisition or IPO exit now face a larger tax bill at that moment. The Government has committed to consulting with the startup sector, and carve-outs are possible before 1 July 2027. But planning under the current announced framework is the prudent position.

The Numbers: How Much More Could You Pay?

Commonwealth Bank's senior economist Trent Saunders modelled the CGT change and found the new system only becomes worse than the old one when annual asset price growth consistently exceeds approximately 4.5-4.8% above inflation. In periods of modest real growth, indexation can be more generous. But in the strong capital appreciation environment that Australian property has experienced for most of the past two decades, the 50% discount was significantly more valuable.

Use Stockspot's free CGT calculator to model how the changes could affect your specific situation based on purchase price, holding period, and expected sale value. It compares old vs new regime side by side.

Worked Example — Investment Property

You buy an investment property in 2026 for $800,000. You sell in 2033 for $1.2M. Your nominal gain is $400,000. Inflation averages 3% per year over the holding period.

Old System

• Tax on $200,000
• 50% discount applied to nominal gain. Marginal rate applies to the remaining half.

New System (from 1 July 2027)

• Tax on ~$215,000
• Cost base indexed to ~$985K. Real gain = ~$215K. Minimum 30% rate applies. At 47% marginal rate: $101,050 in CGT.

The difference compounds over time as gains grow. The Pitcher Partners key dates summary is worth bookmarking to track how the various reform milestones roll out through to 2030.

When the Tax Bill Is Larger Than You Expected

Asset sales sometimes happen for reasons outside your control — a business exit, a forced sale, a deceased estate, or a restructure. When the ATO assessment arrives and it is larger than anticipated, the obligation does not wait. This is where many business owners will find themselves in the period after 1 July 2027.

The first thing to know: do not wait until the debt is listed. An ATO listing on your credit file restricts your ability to borrow and compounds the problem. A proactive financing arrangement, structured before or immediately after the assessment, preserves your position.

Did You Know

Under ATO guidelines, the interest paid on a loan taken out to pay a business-related ATO tax debt is often tax-deductible, reducing the overall cost of borrowing to clear the liability.

Your Financing Options for an ATO Tax Obligation

Broc Finance works with business owners facing tax obligations that have outpaced their cash flow. Whether you have received an ATO assessment you were not expecting or want to plan ahead before an asset sale, structured financing solutions are available:

Property Finance Products for New Build Investment

• ATO Tax Debt Loans: Consolidate your ATO obligation into manageable repayments. Interest may be tax-deductible. No upfront credit checks.
• Secured Business Loans: Borrow against existing property equity to settle a large tax liability without disrupting operating capital.
• Bridging Finance: Cover the window between a property sale settling and an ATO payment falling due. Terms up to 12 months.
• Business Line of Credit: A revolving facility you can draw on when a tax obligation surfaces. Pay interest only on what you use.

New Builds: The Financing Opportunity Most Investors Are Missing

The 2026 Budget deliberately creates a two-tier property investment market. Established properties lose tax advantages. New builds retain them. If you are a property investor, developer, or building professional, this changes the calculus on construction and development finance significantly.

Investors in newly built residential properties retain the choice between the old 50% CGT discount or the new indexation model when they eventually sell — whichever is more favourable. Combined with full negative gearing, a new build investment holds substantially more after-tax appeal than an equivalent established property purchased after Budget night.

The Developer Advantage

For developers, development and construction finance now serves a market being actively incentivised by tax policy. If investor demand for new builds increases as the Budget design intends, a developer's ability to fund construction and carry unsold stock becomes more commercially important, not less. Residual stock finance gives developers the liquidity to avoid distressed selling while their units sell at the right price and timing.

Property Finance Products for New Build Investment

• Development & Construction Finance: Up to 70% LVR. Single residences, duplexes, low-to-medium density. No presale requirements available.
• Residual Stock Finance: Finance against unsold stock post-development. Up to 70% LVR, terms to 36 months. Separate settlement per unit.
• Caveat Loans: Fastest property finance product. Approval in 24-48 hours. Ideal for investors moving quickly on new build opportunities.
• Commercial Property Loans: Up to 70% LVR. Low doc and full doc available. Rental yields considered for full doc assessment.

Trust Restructuring: The Three-Year Window You Cannot Ignore

The discretionary trust reform is the least publicised change in the package, and potentially the most impactful for business owners who use trusts as their primary holding vehicle. From 1 July 2028, trustees pay a minimum 30% tax on all taxable income of the trust — not just capital gains. In some structures, particularly where income is being distributed to corporate beneficiaries, effective tax rates could reach levels that make the trust structure unworkable.

The Government has provided rollover relief for three years from 1 July 2027, allowing businesses to restructure out of a discretionary trust into a company, unit trust, or other entity without triggering a CGT event at the point of restructure. The window is three years, but the preparation work starts now. As Brown Wright Stein Lawyers noted in the Law Society Journal, "people are going to have to think very carefully about how they're going to structure their arrangements moving forward."

Restructuring a Trust Requires Financing Too

Restructuring involves legal advice, potential stamp duty, and may require refinancing existing loan facilities that were structured around the trust entity. Broc Finance can assist with secured business loans for legal and restructuring costs, refinancing property held in the trust into a new entity, and cash flow facilities to manage liquidity during a transitional period.

Key Milestones for Trust Holders

May 2026 onwards – Review your structure

Meet with your accountant to map out how the trust minimum tax affects your specific distributions and beneficiaries. Identify whether restructuring makes financial sense.

1 July 2027 – CGT changes take effect + Rollover window opens

New CGT indexation and 30% floor commence. Three-year rollover relief period begins for trust restructures. Start the restructuring process now if you intend to act.

1 July 2028 – Trust minimum tax commences

30% minimum tax on discretionary trust income takes effect. Structures that have not been reviewed by now face the full impact from this date.

1 July 2030 – Rollover relief window closes

The three-year CGT rollover window for trust restructures ends. Any restructures after this date lose the rollover protection and may trigger a taxable CGT event.

For Startup Founders: Debt vs Equity Is a More Compelling Conversation Now

The removal of the 50% CGT discount changes the calculus on how founders think about equity exits. A higher CGT on exit reduces the after-tax value of equity in a successful startup compared to the old system. This is not a reason to abandon equity-based compensation — but it is a reason to take a harder look at debt financing for business setup and growth rather than diluting equity in exchange for capital that will eventually be taxed more heavily on exit.

The Government acknowledged the concern, noting in the Budget papers that it will consult with the tech and startup sector on how the CGT reform interacts with early-stage investment incentives. Me&u CEO Kim Teo warned in SmartCompany that the changes could push capital, talent, and ideas offshore if startup-specific carve-outs are not introduced.

The Debt Advantage for Startups

Unlike equity, a startup business loan does not dilute your ownership, does not trigger a CGT event on repayment, and the interest is tax-deductible. For businesses with real estate to offer as security, funding from day one is possible with no minimum trading history. For businesses trading 6+ months, unsecured options open up as well.

What the Reform Does NOT Change

Given the volume of commentary, it is worth being clear about what remains intact:

• Your own home is fully exempt. The main residence CGT exemption is completely unchanged.
• Superannuation fund CGT treatment (the 1/3 discount within super) is largely unaffected.
• Small business CGT concessions — the active asset reduction, 50% active asset discount, retirement exemption, and 15-year exemption — remain in place for eligible businesses. The ATO's overview of CGT issues for privately owned groups covers the key criteria.
• Assets purchased before Budget night are grandfathered on negative gearing indefinitely. For CGT, only gains from 1 July 2027 onward use the new rules.
• Companies were never eligible for the 50% individual CGT discount and are largely unaffected.
• Income support recipients including Age Pension recipients are exempt from the 30% minimum tax.

The Legislation Is Not Yet Law — But Plan Anyway

This is a critical point for planning: the ATO has confirmed that as of Budget night, the measures are announced policy but not yet law. They require legislation to pass Parliament before taking effect on 1 July 2027. The Coalition has committed to repeal both changes if elected, making the political risk real.

Our Advice

Prudent business owners do not wait for legislative certainty before reviewing their position. The changes are detailed, the design is specific, and the 1 July 2027 start date gives less than 14 months to plan. The cost of reviewing your position now and finding nothing urgent is far lower than the cost of being caught unprepared after the legislation passes.

Frequently Asked Questions

Does the CGT change apply to my home?

No. The main residence CGT exemption is fully retained and unchanged. Your principal place of residence is not affected.

I bought an investment property before Budget night. Am I affected?

For negative gearing: no. Your existing property retains the old rules for as long as you own it. For CGT: only gains accruing from 1 July 2027 onward are subject to the new rules. Gains accrued up to that date retain the 50% discount. The Budget's worked examples factsheet walks through how the split is calculated.

What is the 30% minimum tax floor?

It means no matter how low your marginal income tax rate is, capital gains are taxed at a minimum of 30%. If your marginal rate is higher (e.g. 47%), your marginal rate applies instead. Income support recipients including Age Pension recipients are exempt.

How do I estimate my CGT under the new rules?

Stockspot's free CGT calculator lets you compare the old and new systems based on your purchase price, holding period, and expected sale value. It also models the transitional hybrid rule for assets already held.

Can I use a loan to pay an ATO CGT debt?

Yes. ATO tax debt loans are available through Broc Finance's lender panel. The interest may be tax-deductible as a business expense. Contact us for a no-obligation consultation. Pre-approval is available without a credit check.

I hold assets in a discretionary trust. What should I do?

Speak to your accountant about the 1 July 2028 trust tax changes and whether restructuring makes sense. The Government has provided three years of CGT rollover relief from 1 July 2027 for businesses that wish to restructure. If restructuring involves property refinancing or liquidity needs, talk to Broc Finance early. Our property finance team can work through the options alongside your legal and tax advisers.

Are shares and ETFs also affected?

Yes. The new CGT regime applies broadly to all capital assets outside superannuation — not just property. That includes Australian shares, international shares, ETFs, managed funds, business assets, startup equity, and employee share scheme interests.

What financing options does Broc Finance offer for the CGT changes?

We work across ATO tax debt loans, secured business loans, bridging finance, development finance, and startup loans. Call 1300 253 041 or complete our 60-second application form for a free consultation.

Don't Let the CGT Changes Catch You Off Guard

Whether you need to finance an ATO obligation, plan a trust restructure, or take advantage of new build incentives — we can help.

Start Your Application or call us directly 1300 253 041.