The CGT Shake Up: Why 30 June 2027 is the deadline you can’t ignore (But can’t rush)

The capital gains tax (CGT) landscape is undergoing a sizeable shift. Under the proposed rules, the familiar 50% CGT discount for individuals, trusts, and partnerships will be replaced with cost base indexation from 1 July 2027.

To bridge the old and new regimes, “Tranche 2” of the consultation legislation introduces a transitional mechanism: any CGT assets held on 30 June 2027 will be subject to a deemed disposal and

requisition. This effectively draws a line in the sand, forcing taxpayers to establish a reset cost base using one of two methods. These rules will affect many people from investors and business owners holding assets like real estate, shares, or business goodwill.

The Two Options: Apportionment vs. Market Valuation

Taxpayers will have a choice to make in calculating their reset cost base and determining how their ultimate gain is taxed

The Apportionment Method

Treasury’s proposed apportionment method divides the overall capital gain (or loss) based on the asset’s ownership periods:

• • Pre-1 July 2027: The portion of the gain allocated to this period retains the existing 50% CGT discount.

• • Post-1 July 2027: The portion of the gain allocated here is taxed under the new system, which allows for inflation via CPI indexation (and discount).

This method is intended for assets that do not have a readily ascertainable market value. It saves you the hassle of getting a valuation, but it comes with a massive mathematical assumption: it assumes your asset grew in value evenly over the entire time you held it. This issue is, growth assets don’t behave in a linear fashion.

The Formal Market Valuation Method

If your asset experienced a massive surge in value before 1 July 2027, the apportionment method will unfairly penalise you by dragging some of that early growth into the new, less favourable tax regime.

WLF Business & Personal Advisory Partner, Paul Lyons comments that:

“For assets where growth has been uneven, a formal valuation as at 30 June 2027 will likely give you a better outcome. By obtaining a valuation, you lock in the actual value increase pre-1 July 2027 under the old 50% discount rules. It’s important to note that taxpayers will be able to examine the two methods and adopt the one that produces the best outcome.”

Pre-CGT assets

There is also a significant change to the capital gains tax (CGT) treatment of assets acquired on or before 19 September 1985. From 1 July 2027, these assets will no longer be fully exempt from CGT. Instead, capital gains arising after that date will become taxable, while gains accrued before 1 July 2027 will continue to be exempt. This will once again necessitate a valuation using one of the two methods outlined above for any pre-CGT assets you may hold.

No forward-dating allowed

It might be tempting to get your valuer on the phone right now to stamp a value on your asset for 30 June 2027. However, you cannot pre-empt a market value before the date actually arrives. The valuation must reflect the asset’s true market value exactly as at 30 June 2027.

You also do not need to panic if you don’t have a valuation in hand on the morning of 1 July 2027. With the sheer number of valuations required and the limited number of valuers, it is simply not possible to have them all done on 30 June 2027. This will mean that many will be undertaken retrospectively and potentially some taxpayers may wait until the asset is actually sold before getting one.

The Traps: Costs, Losses, and the 30% minimum tax

Before you opt for a formal valuation on every asset you own, you must weigh the costs against the tax benefits.

• • Valuation Costs: Valuing illiquid assets (like unlisted shares or business goodwill) is expensive. While this upfront outlay can form part of your asset’s cost base for CGT purposes, it is still cash out the door today.
    
    

• • Capital Losses: Under the new rules, any capital losses arising on or after 1 July 2027 must first be applied against any gains calculated using the old discount method.
    
    

• • 30% Tax in Capital Gains: The Government has proposed a minimum 30% tax to apply to capital gains accruing from 1 July 2027 to deter taxpayers from deferring capital gains to income years in which they are subject to lower marginal tax rates. For example, a retiree with a marginal rate of 16% would still pay 30% on a real gain. That is close to double the tax on the same sale today. Income support recipients, including Age Pension recipients, will be exempt from the minimum 30% tax, as will testamentary trusts (previously they were caught in the net). There is also a consultation paper out for comment on a new 50 percent discount for early-stage investors, including founders and employee share scheme participants of innovative start-up businesses. 

The ‘Widows’ Tax’

One of the most heavily criticised impacts of the new regime was the so-called “widows’ tax” or “divorcees tax”. This sleeper issue would have arisen when an individual dies or separates, triggering a transfer of assets to their spouse and potentially negating their ability to continue to use negative gearing. The Government has moved to fix this issue so that existing residential dwellings acquired from a spouse as a result of inheritance or relationship breakdown will still retain their negative gearing grandfathering.

Super?

Keep in mind that super is still an attractive vehicle to build your wealth:

• • In accumulation phase, investment earnings are generally taxed at up to 15%.

• • Superfunds will not be subject to the new minimum 30% tax on capital gains and they will retain their 33.33% CGT discount

• • Capital gains on assets held for more than 12 months can effectively be taxed at 10% after the one-third CGT discount

• • Concessional contributions are generally taxed at 15% when they enter super, rather than at your personal marginal tax rate (although additional tax can apply for higher-income earners).

Good Advice is Paramount

Understandably, the changes have caused widespread confusion in the community. Daily running commentary on the proposed drafting and continual tweaks to policy make it difficult to keep up. Our approach is to keep a watch on the legislation, but until it is finalised, we are wary of making any wholesale changes to our clients’ structuring. WLF is here to help and guide you every step of the way. If you have any questions or concerns on how these rules may affect you, please contact us. – HERE