New CGT Rules for Shares in Australia: What Investors Need to Know
Updated: 6 days ago
Australia is changing the way capital gains tax applies to investments, including shares.
From 1 July 2027, the familiar 50% CGT discount will be replaced for relevant future gains with a new system based on inflation, together with a minimum 30% tax rate on real capital gains.
If you invest in shares, you might be wondering:
What happens to shares I already own?
Is it still important to hold shares for 12 months?
Should I sell shares before 1 July 2027?
Let's make the new rules as simple as possible.
How Does CGT on Shares Work Now?
Under the existing rules, if you're an eligible Australian resident individual and sell shares you've owned for at least 12 months, you can generally access the 50% CGT discount.
For example:
You buy shares for $20,000.
You later sell them for $30,000.
Your capital gain is $10,000.
If you're eligible for the 50% CGT discount, the gain can generally be reduced to $5,000 before calculating your net capital gain.
That's the system Australian investors have become familiar with.
What's Changing From 1 July 2027?
From 1 July 2027, the general 50% CGT discount will no longer apply to relevant new gains in the same way.
Instead, the new system will:
1. Adjust the cost of your investment for inflation
and
2. Apply a minimum 30% tax rate to relevant real capital gains.
The Government's objective is to tax the real increase in value of an investment after inflation, rather than simply applying a flat 50% discount to the nominal gain.
What Does Adjusting for Inflation Mean?
This sounds more complicated than it needs to be.
Imagine you buy shares for $20,000.
Over the years you own them, inflation increases.
Under the new system, the relevant cost base can be increased to recognise that inflation before the capital gain is calculated. The legislation provides for indexation using official quarterly index numbers.
You don't choose the inflation rate yourself.
And you don't need to sit at home calculating CPI every quarter.
The important thing to understand is:
The new system attempts to tax the real growth in your investment after allowing for inflation.
What Happens to Shares I Already Own?
This is probably the most important question for existing investors.
You don't lose the existing CGT treatment on gains that have already built up before 1 July 2027.
The Government has made the changes prospective.
Broadly, gains accrued before 1 July 2027 retain access to the existing CGT treatment, while relevant gains accruing from 1 July 2027 move into the new system.
The legislation achieves this through transitional rules that can treat an eligible asset held across 30 June 2027 as being sold immediately before 1 July 2027 and reacquired, generally using its market value at that time. The pre-1 July 2027 gain or loss is deferred until the investment is actually sold.
Simple Example
Suppose you bought shares years ago for:
$20,000
By 30 June 2027 they're worth:
$35,000
You don't actually sell them.
You keep them and eventually sell them for:
$50,000
Broadly, the tax calculation may need to recognise two periods:
Growth before 1 July 2027
and
Growth from 1 July 2027 onwards.
The first period can retain the old CGT treatment, while the later period is dealt with under the new rules.
The actual calculation can become more complicated than this example, particularly where there are capital losses, additional share purchases, corporate actions or other cost-base adjustments.
Does the 12-Month Rule Still Matter?
Yes.
This is particularly important because investors may incorrectly assume the 12-month rule disappears when the general 50% discount changes.
Under the new legislation, the 12-month holding period remains relevant. In particular, the new indexation generally requires the CGT asset to have been acquired at least 12 months before the CGT event.
So the date you buy and sell your shares will continue to matter.
What If I Sell Shares Within 12 Months?
If you buy and sell shares quickly, don't assume you'll receive the same tax treatment as a long-term investor.
The new indexation rules generally require the asset to have been held for at least 12 months.
That makes record keeping particularly important.
For every investment, you should keep records showing:
purchase date
purchase price
brokerage
sale date
sale proceeds
brokerage on sale
reinvested distributions where applicable
other relevant cost-base adjustments.
If you've made multiple purchases of the same company's shares at different times, identifying which shares were sold can also become important.
What About Capital Losses?
Capital losses still matter.
If you sell one investment for a profit and another for a loss, your capital losses are taken into account when determining your net capital gain under the CGT rules.
Unused net capital losses may generally be carried forward for use against eligible future capital gains.
This is why investors should look at their entire portfolio, rather than calculating tax on each profitable share sale in isolation.
Should I Sell My Shares Before 1 July 2027?
Not necessarily.
A change in tax law, by itself, isn't a reason to sell a good investment.
Selling shares may trigger CGT now.
You also need to consider the investment itself, your portfolio, transaction costs, capital losses and your personal circumstances.
The new rules are also designed so that gains accrued before 1 July 2027 can retain the old treatment.
So don't assume you need to rush out and sell your portfolio before the new rules commence.
Do I Need to Know What My Shares Are Worth at 30 June 2027?
For investors holding shares across the transition date, 30 June 2027 is an important date.
The transitional legislation can use the market value of an existing CGT asset immediately before 1 July 2027 when applying the deemed sale and reacquisition rules.
For publicly listed shares, historical market prices are generally much easier to establish than the value of assets such as private companies or property.
Nevertheless, keeping accurate records will become even more important.
What About ETFs?
ETFs and managed investments can be more complicated because your tax position may involve distributions, capital gains, cost-base adjustments and trust taxation rules.
The new legislation also contains specific rules dealing with trusts and capital gains flowing through to beneficiaries.
Don't assume the calculation for an ETF will always be as simple as:
Sale price minus purchase price.
Your annual tax statements remain important.
What About US and Overseas Shares?
Australian residents are generally subject to Australian tax rules on relevant foreign investments as well as Australian investments.
Foreign shares can add another layer of complexity because you may need to consider foreign currency conversions, foreign tax and Australian CGT rules.
The new indexation provisions also contain residency requirements, including restrictions affecting foreign and temporary residents.
The Bottom Line
From 1 July 2027, CGT on shares is changing significantly.
The easiest way to remember the new system is:
Before 1 July 2027: the existing CGT discount rules continue to apply to eligible gains.
From 1 July 2027: relevant future gains move to the new inflation-based system and minimum tax rules.
Already own shares: gains built up before 1 July 2027 are protected by transitional rules.
12-month rule: still important.
Capital losses: still important.
Records: more important than ever.
For most investors, there is no need to become an expert in the new CGT legislation.
But if you have a substantial share portfolio or are considering selling shares around the transition to the new system, it makes sense to understand the tax consequences before you sell.
Need Help With CGT on Shares?
Dolman Bateman assists Australian investors with capital gains tax calculations, share investments, ETFs, foreign shares and tax planning.
If you're considering selling a substantial shareholding, we can calculate the potential CGT consequences before the transaction occurs.
Contact Dolman Bateman to discuss your share portfolio and capital gains tax position.
This article provides general taxation information only and does not constitute financial or investment advice. Tax treatment depends on your individual circumstances.
Disclaimer: The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. All content relates to the current financial year only. Future changes to tax laws, thresholds or administrative requirements may affect the accuracy or relevance of this information, so you should always confirm that the guidance remains current. While every effort has been made to ensure accuracy at the time of publication, Dolman Bateman accepts no responsibility or liability for any loss or damage arising from reliance on this information. You should seek professional advice tailored to your circumstances before making any financial or tax decision.
