What the New CGT Regime Actually Costs You: Worked Examples Across 5 Holding Periods
The 50% CGT discount has been replaced with CPI indexation plus a 30% minimum tax rate. We work through five real scenarios — same property, same gain, different tax outcomes under old vs new regimes.
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The headline number, then the maths
The 2026 Budget abolished the 50% capital gains tax discount for individuals on assets acquired after 7.30pm AEST 12 May 2026. From 1 July 2027 the new regime is CPI cost-base indexation plus a 30% minimum effective rate.
What does that mean in dollars? Let us work through five scenarios — same asset, same buyer profile, different holding period. All examples use a $700,000 Sydney unit, a buyer on the 37% marginal bracket ($135,001-$190,000 taxable income), and a long-run nominal capital growth rate of 5.5% p.a. with CPI of 2.5% p.a..
The four numbers you need to know
| Variable | Old regime (≤ 30 Jun 2027) | New regime (≥ 1 Jul 2027) |
|---|---|---|
| Discount on gain | 50% | None — but cost base is CPI-indexed |
| Effective rate on gain (37% bracket) | 18.5% | 30% floor (or higher if marginal × real gain > 30%) |
| Inflation treatment | Ignored | Subtracted from gain (cost-base indexation) |
| Net result vs old | Baseline | Higher tax on most realistic holds |
The new regime is better than the old regime in only one scenario: a high-inflation, low-real-growth environment held for a very long time. In every other realistic case, the new regime collects more tax.
Five worked examples
Buy price: $700,000. Sale price grows at 5.5% p.a. nominal. CPI 2.5% p.a. Buyer: 37% bracket (38% with Medicare; we use 37% for tax-only clarity).
Example 1 — 5-year hold
Sale price (5.5% × 5) = $914,795
Nominal gain = $214,795
Indexed cost base (2.5% × 5) = $791,991
Real gain = $122,804
OLD regime
Discounted gain = $214,795 × 50% = $107,398
Tax = $107,398 × 37% = $39,737
Effective rate (of nominal gain) = 18.5%
NEW regime
Marginal tax = $122,804 × 37% = $45,438
30% min tax = $122,804 × 30% = $36,841
Binding = $45,438 (marginal, higher)
Effective rate (of nominal gain) = 21.2%
Δ Tax: +$5,701 under new regime (+14% more tax)
Example 2 — 10-year hold
Sale price (5.5% × 10) = $1,195,387
Nominal gain = $495,387
Indexed cost base (2.5% × 10) = $896,022
Real gain = $299,365
OLD regime
Discounted gain = $495,387 × 50% = $247,693
Tax = $247,693 × 37% = $91,646
NEW regime
Marginal tax = $299,365 × 37% = $110,765
30% min tax = $299,365 × 30% = $89,810
Binding = $110,765
Effective rate = 22.4%
Δ Tax: +$19,119 under new regime (+21%)
Example 3 — 20-year hold
Sale price (5.5% × 20) = $2,041,649
Nominal gain = $1,341,649
Indexed cost base (2.5% × 20) = $1,146,840
Real gain = $894,810
OLD regime
Discounted gain = $1,341,649 × 50% = $670,824
Tax = $670,824 × 37% = $248,205
NEW regime
Marginal tax = $894,810 × 37% = $331,080
30% min tax = $894,810 × 30% = $268,443
Binding = $331,080
Effective rate = 24.7%
Δ Tax: +$82,875 under new regime (+33%)
Example 4 — 30-year hold (retirement realisation)
Sale price (5.5% × 30) = $3,488,338
Nominal gain = $2,788,338
Indexed cost base (2.5% × 30) = $1,468,131
Real gain = $2,020,207
OLD regime
Discounted gain = $2,788,338 × 50% = $1,394,169
Tax @ marginal (45% effective) = $627,376
NEW regime
Real gain × 45% (top bracket) = $909,093
30% min tax (binding only if lower) = $606,062
Binding = $909,093
Δ Tax: +$281,717 under new regime (+45%)
Example 5 — The "indexation wins" case (45-year hold, low growth, high inflation)
This is the only realistic scenario where indexation beats the 50% discount. Assume CPI 4.5% p.a. (high) and growth 5.5% p.a. (so real growth only 1% p.a.) over 45 years.
Sale price (5.5% × 45) = $7,627,910
Nominal gain = $6,927,910
Indexed cost base (4.5% × 45) = $5,036,484
Real gain = $2,591,426
OLD: $6,927,910 × 50% × 45% = $1,558,780
NEW: $2,591,426 × 45% = $1,166,142 (30% min not binding)
Δ Tax: -$392,638 under new regime (-25%)
Real growth is the entire story. In normal conditions (CPI ~2.5%, growth ~5.5% → real growth ~3%), the new regime costs more. In stagflationary conditions (CPI ≥ 4%, real growth ≤ 1%), indexation rescues you. This is not the regime most Australian property investors should plan for.
Visualising the impact
TAX UNDER OLD vs NEW REGIME (Sydney unit, $700k, 5.5% growth, 2.5% CPI, 37% MTR)
$0 ───── $100k ───── $200k ───── $300k ───── $400k
5yr hold Old │██████████░░░░░░░░░░░░░░░░░│ $39,737
New │██████████████░░░░░░░░░░░░░│ $45,438 (+14%)
10yr hold Old │██████████████████████░░░░░│ $91,646
New │██████████████████████████░│ $110,765 (+21%)
20yr hold Old │██████████████████████████████████████░░│ $248,205
New │██████████████████████████████████████████████████░░│ $331,080 (+33%)
The wedge widens with time. The old regime was most generous for the longest holders. The new regime hits the long-term wealth builders hardest — which is exactly the demographic Treasury was targeting.
What this changes about how to think
Annualised after-tax yield matters more than nominal gain. A property growing 5.5% p.a. and yielding 4% gross now returns (under the new regime, 37% bracket, 20-year hold) approximately 5.8% after-tax annualised total return, down from 6.4% under the old regime. The 60-basis-point reduction is structural and applies to every future purchase.
Marginal rate management becomes more valuable. Under the new regime, dropping yourself from a 37% bracket to a 30% bracket in the year of sale saves 7 percentage points on the real gain. Realisation timing — selling in a year you have low income (parental leave, career break, retirement transition) — pays off more than under the old regime.
Super becomes structurally cheaper. The SMSF 33⅓% discount is unchanged. The effective rate on a 10-year-held SMSF property gain is 10% (15% × 66.7%) — less than half of the new individual rate of 22%+. If your retirement horizon is the holding horizon, super is now the obvious vehicle.
Holding becomes more valuable than churning. Under the old regime, swapping one property for another every 7-10 years was reasonable — the 50% discount cushioned realisation. Under the new regime, every realisation triggers a 22-25% effective tax wedge with no offset against the inflation component of the next purchase. Buy well, hold long, manage cashflow.
Model your specific numbers: Capital Gains Tax Calculator | Negative Gearing Calculator | Investment Property Yield Calculator.
Sources: 2026-27 Federal Budget tax fact sheet; ATO Capital Gains Tax — Australian Residents; ASIC Moneysmart. Worked examples use simplifying assumptions (constant growth, constant CPI, no buying/selling costs, no rental cashflow effect on cost base). Real outcomes vary materially with rental income, depreciation recapture, capital improvements, and partial-year disposals.
This article is general information, not tax advice.
Frequently asked questions
How much more tax will I pay on a 10-year property hold?
For a $700,000 Sydney unit growing at 5.5% p.a. nominal, held 10 years by a 37%-marginal-rate buyer, the new regime collects approximately $19,000 more in tax (about 21% more) than the old 50% discount regime. The wedge widens with holding period: roughly +14% at 5 years, +33% at 20 years, +45% at 30 years.
When does the new CGT regime kick in?
For assets contracted after 7.30pm AEST 12 May 2026, with commencement on 1 July 2027. Assets contracted before Budget night are grandfathered under the existing 50% discount regime indefinitely, for as long as you continue to hold them.
What is the 30% minimum effective tax rate?
A new floor on the effective tax rate applied to the real (CPI-indexed) gain. If your marginal rate × real gain comes in below 30% of the real gain, the 30% floor binds. For most middle-bracket taxpayers, the marginal rate × real gain produces the binding figure; the floor binds primarily for very low marginal rates and structures with concessional treatment.
Does the change affect SMSF property?
No. The super fund 33⅓% CGT discount is explicitly unchanged. After 1 July 2027, super becomes a structurally more attractive vehicle for long-term property holdings on a relative basis, because the individual 50% discount has been abolished while the super discount has not.
Is CPI indexation enough to offset abolishing the discount?
Only in unusual scenarios — high inflation combined with low real growth, held for several decades. In normal Australian conditions (CPI ~2.5%, real growth ~3%), indexation recovers only part of what the 50% discount provided. The 30% minimum effective rate then caps the remaining benefit for high earners.
Should I bring forward a planned sale before July 2027?
Only if you were planning to sell in the next 12-24 months anyway. There is no forced disposal: existing holdings continue under the old 50% discount regime indefinitely. Selling earlier than your natural exit just to "lock in" the discount usually destroys more value (through reduced compound growth) than it saves in tax.
RealEstateCalc Editorial
Property & Finance ResearchThe RealEstateCalc editorial team researches and writes about Australian property, finance, and tax topics. All content is fact-checked against official sources including the ATO, state revenue offices, ASIC Moneysmart, and the RBA.
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