If you are asking how much is capital gains tax in Australia, the honest answer is: it depends on your income, what you own, and when you bought it. For most investors, the effective rate has historically sat between 20–25% thanks to the 50% CGT discount. That is about to change.
In the May 2026 Budget, Prime Minister Anthony Albanese announced that Labor’s long-promised capital gains tax reforms are now going ahead. The 50% CGT discount will be replaced with inflation-indexed cost bases and a minimum 30% tax rate from 1 July 2027. Negative gearing on existing investment properties ends in 2027–28.
This article covers everything: how Australian capital gains tax works today, what Labor’s CGT changes actually mean, the impact on small business owners, how negative gearing is being restructured with practical examples throughout.
Table of Contents
- What Is Capital Gains Tax in Australia?
- What is the current Capital Gains Tax rate in Australia?
- Capital Gains Tax Changes: What’s Actually Changing?
- Capital Gains Tax Impact: Who Gets Hit the Hardest?
- What Is Negative Gearing?
- The New Negative Gearing Rules Explained
- Capital Gains Tax for Small Business in Australia
1. What Is Capital Gains Tax (CGT) in Australia?
Capital gains tax (CGT) is the tax you pay on the profit (“capital gain”) you make when you sell or dispose of an asset. The gain is added to your assessable income for the year and taxed at your marginal income tax rate.
CGT applies to a wide range of assets, including:
- Investment properties
- Shares and managed funds
- Cryptocurrency
- Business assets and goodwill
- Collectibles and personal use assets above certain thresholds
CGT was introduced in Australia on 20 September 1985. Any asset acquired before this date — a “pre-CGT asset” — is not subject to the tax.
However, your main residence (the home you live in) is generally exempt from CGT, which is why the debate around negative gearing and investment properties is so politically charged.
2. What is the current Capital Gains Tax rate in Australia?
There is no flat CGT rate in Australia. Instead, the gain is added to your total taxable income and taxed at your marginal income tax rate. Currently. if you hold an asset for more than 12 months before selling, you currently receive a 50% discount on your capital gain. This means only half the profit is added to your taxable income.
Example — Current Rules:
Sarah bought investment units in Melbourne for $500,000 in 2018. She sells in June 2026 for $800,000, making a $300,000 capital gain. Because she held the asset for more than 12 months, she applies the 50% discount. Only $150,000 is added to her taxable income. If her marginal rate is 39% (37% + 2% Medicare), she pays approximately $58,500 in CGT instead of $117,000 without the discount.
For companies, capital gains are taxed at the company tax rate of 25-30% (depending on their turnover). They are not entitiled to 50% CGT discount like individuals.
3. Capital Gains Tax Changes: What’s Actually Changing?
The Albanese government’s in May 2026 Federal Budget delivered the most significant overhaul of Australia’s tax system in more than 25 years. Prime Minister Anthony Albanese framed these changes as restoring “intergenerational fairness” and directing investment toward new housing supply rather than existing properties.
The Key CGT Reform: Replacing the 50% Discount with Indexation
From 1 July 2027, the current 50% CGT discount will be scrapped and replaced with a cost base indexation model, along with a minimum tax rate of 30% on realised gains.
Here is what that means in plain English:
- Old rule: Take your gain, halve it, add it to your income, pay tax at your marginal rate.
- New rule: Adjust your cost base (original purchase price) for inflation using the Consumer Price Index (CPI), then pay tax on only the real gain above inflation — but at a minimum tax rate of 30%.
The government argues this is actually fairer because investors who only made modest gains above inflation won’t be over-taxed, while those who made large real profits will pay appropriately.
4. Capital Gains Tax Impact: Who Gets Hit the Hardest?
Property Investors
Existing property investors are largely protected by grandfathering. However, new investment properties purchased after 12 May 2026 (other than new builds) will not benefit from negative gearing deductions. Going forward, CGT on all new investments will be calculated under the indexation model with a 30% minimum.
Share Investors
All new share purchases from 1 July 2027 will be subject to the new CGT rules. Long-term share investors who currently benefit from the 50% discount will see their tax bill increase on future gains from newly acquired shares. However, since shares are generally more liquid than property, investors may adjust their strategies more easily.
High-Income Earners
For someone on the top marginal rate of 47% (45% + 2% Medicare levy), the old 50% discount meant an effective CGT rate of about 23.5%. The new 30% minimum rate actually represents a reduction for some of the highest earners, though the removal of the 50% discount will affect middle-income investors more significantly.
Renters
Supporters of the reforms argue that by redirecting investor incentives toward new builds, the changes will increase housing supply and, over time, moderate rents. Critics argue that reducing the attractiveness of investment property could shrink the rental pool and push rents up in the short term.
5. What Is Negative Gearing?
Negative gearing occurs when the costs of owning an investment property (or other asset) exceed the income it earns. The resulting loss can be deducted against your other income — typically your salary — reducing your overall tax bill.
Simple example:
Tom owns a rental property generating $24,000 per year in rent. His interest repayments, council rates, insurance, property management fees, and maintenance total $35,000. He is “negatively geared” by $11,000. Tom can deduct that $11,000 loss against his salary of $120,000, reducing his taxable income to $109,000 and saving him approximately $4,290 in income tax.
The strategic bet with negative gearing is that while you lose money each year, the eventual capital gain on sale will more than compensate. For decades, with steadily rising Australian property prices, this strategy has worked handsomely for investors — but at a significant cost to the federal budget.
According to parliamentary data, negative gearing by property investors reduced personal income tax revenue by $6.7 billion in 2014–15 and $10.9 billion in 2023–24 — a cost that is ultimately borne by other taxpayers.
6. The New Negative Gearing Rules Explained
From 2027–28 financial year, negative gearing for residential property will be restricted to new builds only.
What This Means in Practice
- If you buy an existing home as an investment after 12 May 2026, you can no longer deduct the rental losses against your other income.
- If you buy a newly constructed dwelling, negative gearing deductions remain available.
- All existing investment properties purchased on or before 12 May 2026 at 7:30pm AEST are fully grandfathered — nothing changes for current investors.
The government’s rationale: over 80% of new investor lending goes to existing homes, meaning most investment activity simply transfers ownership without creating new housing. By limiting the tax concession to new builds, Canberra hopes to redirect investment capital toward construction and increase housing supply.
The Historic Precedent
This is not the first time Australia has restricted negative gearing. The Hawke government quarantined it between 1985 and 1987, preventing property losses from being offset against wage income. It was reversed in 1987 after landlords reportedly shifted into new builds — ironically, the exact outcome the current government is trying to engineer.
7. Capital Gains Tax for Small Business in Australia
If you run a small business, the CGT landscape looks quite different. Australia maintains a generous set of small business CGT concessions that can dramatically reduce — or entirely eliminate — your capital gains tax when selling business assets. Importantly, these concessions survive the 2027 reform.
Who Qualifies for Small Business CGT Concessions?
To access the concessions, you must meet at least one of the following tests:
- Your aggregated annual turnover is less than $2 million, OR
- Your net assets (excluding your home, super, and personal assets) total less than $6 million
The Four Small Business CGT Concessions
1. 15-Year Exemption If your business has continuously owned an active asset for at least 15 years and you are 55 or older and retiring (or permanently incapacitated), the entire capital gain is exempt from tax. This is the most powerful concession available.
Example: Bruce, aged 62, sells the farming property his business has owned for 18 years for $3.5 million, generating a $2.2 million capital gain. Under the 15-year exemption, his CGT payable is $0. He can also contribute sale proceeds into super (up to the CGT cap of $1.865 million for 2025–26) without those contributions counting against his normal non-concessional contribution cap.
2. Small Business 50% Active Asset Reduction If you sell an active business asset you’ve owned for at least 12 months, you can reduce the capital gain by 50%. This is on top of the standard CGT discount (for individuals), meaning you could reduce your gain by up to 75% in total under current rules.
Example: Mei sells her café goodwill for a $200,000 gain. After applying the general 50% CGT discount ($100,000 remaining) and then the small business 50% active asset reduction ($50,000 remaining), only $50,000 is added to her taxable income.
3. Retirement Exemption You can exempt up to a lifetime limit of $500,000 in capital gains when selling active business assets if the proceeds are used for retirement. If you are under 55, the exempt amount must be contributed to superannuation.
4. Small Business Rollover You can defer your capital gain if you acquire a replacement active business asset or make a capital improvement to an existing active asset. This effectively postpones the CGT liability rather than eliminating it.
Small Business CGT After the 2027 Reform
The government has confirmed that the small business CGT concessions under Division 152 of the tax law will not be removed under the 2027 reform. Small business owners retain access to all four concessions. This is critical relief for farmers, tradies, retailers, and other business owners who often hold the bulk of their wealth in their business.
Key Takeaways
- Australian capital gains tax is not a flat rate — it is your marginal income tax rate applied to the capital gain (after any applicable discount).
- How much is capital gains tax in Australia? For individuals, effectively 0%–47% of the gain, depending on your income. For companies, 30%.
- Labor’s CGT changes replace the 50% CGT discount with inflation-indexed cost bases and a 30% minimum tax from 1 July 2027 — but with grandfathering for existing assets.
- Negative gearing is restricted to new builds from 2027–28, but existing investments are fully protected.
- Capital gains tax for small business in Australia remains heavily concessioned under the four small business CGT concessions — these survive the reform.
- The trust tax changes from 2028–29 remain politically contentious, with critics calling them a backdoor “death tax” on family wealth.
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