Australia's New CGT Rules: Why Some Investors Could Pay 4x More Tax | APS181

On the 12th of May 2026, Treasurer Jim Chalmers said this in his Budget speech.

He's talking about capital gains tax, charged on the profit you make selling an asset. When it began in 1985, gains were taxed after inflation was taken out. From 1999, if you'd held an asset for at least a year, only half the gain was taxed. On the 1st of July 2027, the rules switched back, with an extra condition most people haven't noticed.

You'd expect a change like this to target the wealthy. But the Financial Services Council found that someone on a modest income selling a small investment could see the tax on the same gain more than quadruple.

And if you're thinking of moving overseas, hold off on booking a flight. The day you lose Australian tax residency, the ATO, our tax office, can tax some of your assets as if you'd sold them, even though you haven't sold anything.

Section 1: How Is CGT Changing?

So what does capital gains tax, or CGT, cover, and how will the new rules work? Your home is generally exempt, and super has its own rules, but shares, crypto, investment properties, and family trust assets are all caught when sold at a profit.

There are three steps. First, your purchase price gets bumped up for inflation. Second, all of the remaining gain goes into your taxable income, with no 50% discount. Third, that gain is taxed at your normal personal income tax rate or 30%, whichever is higher.

Say you're on the top tax bracket and buying in your own name, and we'll leave out costs and depreciation. After July 2027, you buy an established investment property for $800,000 and sell it a few years on for $1 million, with total inflation of 10% in between. Under the old rules, half the $200,000 gain is taxed, and at 45% plus the 2% Medicare levy, that's about $47,000. Under the new rules, your adjusted cost is $880,000, so the remaining $120,000 is taxed in full. The bill comes to about $56,000, nearly $10,000 more. Put simply, the old rules halved any gain, while the new rules only take inflation out.

If you already own property, growth up to the 30th of June 2027 keeps the 50% discount. You can measure it with a valuation on that day, or by spreading the gain over the time you've held it. Many people have also missed that assets bought before September 1985, which have never been taxed on their gains, will be taxed on growth after July 2027. That's changing the rules halfway through. On the top rate, the bill is bigger but it is not outrageous. The real shock is for a different group, whose tax could be four times higher.

Section 2: Who Pays Four Times More?

Who are these people? The Financial Services Council gave the example of a 53-year-old who's been made redundant and is working part-time until retirement. This year, he sells an investment for a $15,000 gain after inflation. He'd pay about $1,050 today but $4,500 under the new rules, more than four times as much.

How does that happen? His income is low, so his tax rate is low, and the 50% discount cuts his tax further. From 2027, that gain can't be taxed below 30%, so a low-income year no longer means a small tax bill.

So does everyone pay four times more? I ran the numbers at three tax rates on a $100,000 paper gain over 10 years, with 2.5% inflation a year. Sell in a low-income year on a 14% rate, and the new tax is roughly 2.4 to 3.3 times the old one. On middle and top tax rates, it's only 10% to 50% more, and if the asset just kept pace with inflation, you might pay nothing. So the four times figure is real, but it lands on modest-income investors selling a small investment in a low-income year.

Surely there's some protection for low incomes? There is, but it's narrow. People on a government payment like the Age Pension or the JobSeeker unemployment payment that year are exempt, but our part-time worker usually isn't on one, and he's nowhere near wealthy.

The government says this is fairer, and Treasury's own examples show the jump for low earners and bigger bills on faster-growing assets. The way I see it, the maths is right, but the impact varies hugely between people. For most people watching, property is the biggest asset, and the new rules go two very different ways.

Section 3: What About Investment Properties?

Where does this leave your investment property? Start with established homes. The dividing line is 7:30pm Sydney time on the 12th of May 2026, when the Budget was announced. If you'd bought or signed a contract before then, you keep negative gearing, which lets your property's loss bring down the tax on your wages. For established homes bought after that, from the 1st of July 2027, losses can only be offset against residential property income, including future gains on sale. They can't be used against your wages, but unused losses carry forward.

New homes are different. Homes that add to the supply can still be negatively geared, and under the bill that includes a house on vacant land, several homes replacing one, and most off-the-plan homes handed over within 24 months of their first occupation certificate.

Then there's ownership. Companies and super funds aren't affected by the discount change, but from the 10th of August 2026, self-managed super funds can't borrow to buy residential property. Family trusts would face the 30% minimum tax from July 2028 under a second bill, introduced on the 14th of October, with a Senate committee due to report on the 13th of November. CPA Australia estimates the accounting advice alone will cost $2 billion to $2.8 billion, or $2,000 to $3,000 for each of about 850,000 trusts.

So new versus established, your timing, and whose name is on the title can make a big difference to what you keep after tax. Overall, though, these rules make the tax burden on Australians heavier.

Section 4: How Much Tax Do We Pay?

How much tax do we pay? Going by preliminary ABS quarterly data, Australian governments took in about $890 billion in tax during 2025-26, nearly $60 billion more than the year before. That's about $32,000 per person.

Where does it come from? The 2010 Henry Tax Review counted around 125 taxes, with ten bringing in about 90% of the total. They fall into three types: taxes on every step forward, taxes on top of taxes, and taxes that rise by themselves.

The first type hits you when you buy a home, set up a business, or take on staff, which means payroll tax. If you're neither a first home buyer nor a foreign buyer, a $1.5 million home in Sydney costs about $64,000 in stamp duty, paid with money you've already been taxed on. Property stamp duty brought in about $41 billion nationally last year, up 18%.

The second type shows up in home insurance in New South Wales. An emergency services levy goes on your premium, 10% GST goes on top of that, and then stamp duty on top of both. Fuel works the same way, with GST charged on a price that already includes about 53.7 cents a litre in excise.

As for the third type, fuel excise goes up with inflation every February and August, but income tax brackets stay put. On $90,000, a 4% pay rise is an extra $3,600, but income tax and the Medicare levy take about $1,150 of it. Your take-home pay rises only about 3.5%, while August inflation was 4%, so in real terms you've gone backwards.

Plenty of countries don't do this. In 2023, 17 of the 38 OECD members lifted their tax brackets with inflation automatically, but Australia didn't. For an average single worker here, income tax takes about 23.5% of total labour costs, while the OECD average is 15.5%. Add social security contributions, though, and our total burden falls below average, because employees here don't pay them.

There's also a cost almost nobody counts, like the evenings landlords spend on depreciation schedules and rent records. CPA Australia puts the cost of all that tax paperwork at about $60 billion a year, so taxpayers spend roughly $13 for each dollar it costs the government to run the system. From earning and spending to hiring and complying, there's tax at every turn.

Australia has become a country where the economy is struggling and public safety is slipping, but tax collection is doing just fine. When tax gets too heavy, people don't keep paying quietly forever, and sooner or later they find another way.

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Section 5: What Happens When a Tax Goes Too Far?

What happens when a tax is pushed too far? Cigarettes are the best example. The excise alone is now about $1.55 a cigarette, so a legal pack of 25 costs more than $50. On the black market, a pack sells for less than half the price. One ABS estimate found about 80% of tobacco and nicotine products used here in 2025 were illegal, up from just over 10% in 2017. In 2019-20, tobacco excise raised about $16.3 billion, and last year's Budget estimate was about $4.1 billion. Tax people too heavily and they change what they do, so the expected revenue never turns up. Some get around it illegally, and others do it entirely within the law.

On the legal side, a co-founder of the comparison site Finder flew to Singapore in early October, calling the CGT change the last straw, with his family moving in stages. Singapore taxes income at no more than 24%, and individuals generally pay no tax on capital gains, while here the top rate plus the Medicare levy comes to nearly half.

So are the wealthy leaving in large numbers? They aren't. Migration consultancy Henley & Partners estimated Australia's net inflow of millionaires at about 5,200 in 2023 and about 1,000 in 2025, although these are projections and the method is disputed. I'm not saying the wealthy are heading for the exits. I am saying Australia is becoming less attractive to people with money. With a tax gap that big, why haven't more of them moved?

Section 6: Can You Just Leave Australia?

So what does it cost to leave? There's a tax bill on the way out. On the day your Australian tax residency ends, your shares, crypto, and overseas assets are treated as sold at market value, which is called a deemed disposal. You can put it off until you sell, but if you don't, you pay tax without selling a single share.

Your Australian home isn't treated as sold when you leave, but the trouble comes later. If you're a foreign tax resident on the day you sign a contract to sell, you lose the main residence exemption, which normally makes your home tax-free, no matter how long you lived there. The only exception is a serious life event. Time as a foreign resident since the 8th of May 2012 also eats into your 50% discount. And the buyer has to hold back 15% of the price at settlement for the ATO, with the balance worked out at tax time.

Say you bought a Sydney home for $1 million in 2022, left Australia in 2026, and sell it for $1.4 million in 2029. If you'd sold before leaving, as a resident, you'd pay no federal tax. Sell from overseas, and under the second bill as currently written, the tax is about $128,000, with the buyer holding back about $210,000 at settlement. The only difference is whether you sold before or after you left.

The first law, already passed, has a tougher rule. From July 2027, being a foreign resident for even one day while you own an asset cancels the inflation adjustment on the whole gain. The second bill would base it on your days as a resident instead, but that's still with the Senate.

And you might not have left at all in the ATO's eyes. Six months in Singapore with your home and family still here probably keeps you an Australian tax resident. Leaving is costly and complicated, so most people will stay, which is understandable, and that's exactly why the real cost of these changes falls on them.

Section 7: What Can Everyday Investors Do?

So what does this mean if you're staying, and what can you do? When a founder leaves, their next company will probably start in Singapore or Hong Kong, and the jobs and company tax go with it. The way I see it, the people who stay lose job opportunities, the government loses tax, and the shortfall will most likely be made up through other taxes.

The head of a major Western Australian gold miner shares the worry. At a Melbourne mining lunch in early October, he said small explorers rely mostly on retail investors, because institutions rarely touch them, and the reform overlooked that. Less retail money means less exploration, and fewer jobs and lower wages later on.

My view is that using the rules to pay less tax legally is what the system was built for, and there's nothing to be embarrassed about.

The first date to watch is the 30th of June next year. Many people's instinct is to sell before then to lock in the 50% discount, but valuing on that date already protects it, so there's no need to rush. The second is the Senate committee's report, because the rules on trusts and foreign residents could still change.

If you already own property and plan to hold it long term, decide on a valuation method for each asset and stick with your holding plan. If you're about to buy, new and established homes are now treated completely differently, and the policy is 100% in favour of new homes. Investors on modest incomes who live partly off their investments should know the year they sell decides whether the 30% minimum kicks in. Family trusts may need to rework distributions once the second bill passes, so trustees should see their accountant early.

Ending

Capital gains tax rules keep changing, and this probably won't be the last time. We can't control how the rules change. What we can control is what we own, how we hold it, and when we sell, including whether we're still a resident at the time. Under the new rules, those decisions carry more weight than ever. Before you act, sit down with a registered tax agent and run your own numbers.

Watch the video version of the blog on YouTube.

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