Over 200% increase in tax – beware

The Australian Federal Budget was handed down by Treasurer Jim Chalmers on 12 May 2026 and passed through both houses of Parliament with amendments and officially received Royal Assent on 26 June 2026.

It took the government 48 days to have their budget approved by the parliament, which is an absolute record, and one should wonder why this was done in such a hurry.

One of the biggest changes in the budget is the replacement of the 50% CGT discount with cost-base indexation and a 30% minimum tax rate from 1st July 2027.

And today I want to get deeper into explanation of those changes. I will show you the sneaky way the current government increase your tax by over 200%.  The outcome of this change will shock you and I wonder if you are going to support this change.

Before I start explaining, please bear with me, as I have a big request. As you know I have my financial planning practice in Melbourne. It is a family business, and I know how difficult it is to run your own business. In Australia we have always been talking about supporting our own local businesses and this is what I am about to ask.

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Now, back to our main topic of that horrific tax increase of Capital Gains changes.

As you know, from 1st July 2027 we will no longer be able to dis­count re­alised cap­i­tal gains by 50% for any cap­i­tal growth that oc­curs on or af­ter 1st July 2027.  In­stead, the cost base of the as­set, if held for more than 12 months, will be in­dexed in line with CPI to de­ter­mine the cap­i­tal gain when the as­set is sold. This is a re­turn to the CGT (Cap­i­tal Gains Tax) cal­cu­la­tion method­ol­ogy used up un­til 21 Sep­tem­ber 1999.

However, there is a trap, for most taxpayers a 30% minimum tax rate will apply for those gains acquired after 1st July 2027.

Recipients of means tested support payments such as Age Pension, DSP, Job Seeker will be exempt from the minimum tax on capital gains if asset sold while receiving a support payment.

Calculations of CGT will become complex for example:

1. As­sets purchased and sold of prior to 1st July 2027 – the ex­ist­ing CGT rules will con­tinue to ap­ply.

2. As­sets ac­quired prior to 1st July 2027 and dis­posed of on or af­ter 1st July 2027 – the rules will de­pend on when the as­set was pur­chased.

• If purchased prior to 20 Sep­tem­ber 1985, the value of the as­set as at 1st July 2027 will be­come the new cost base and the gain since 1st July 2027 is cal­cu­lated us­ing the in­dex­a­tion method, with a 30% min­i­mum tax ap­ply­ing to the re­sult­ing net cap­i­tal gain. This brings pre­vi­ously pre-CGT ex­empt as­sets within the CGT regime go­ing for­ward. If you still own pre-CGT asset, it is time to decide if you wish to continue holding that asset or sell with no tax consequences, but please get a good advice.
• If ac­quired af­ter 20 Sep­tem­ber 1985, the 50% CGT dis­count will re­main avail­able for the gain that ac­cu­mu­lates from time of pur­chase un­til 30 June 2027. The in­dex­a­tion method will then ap­ply to any gain ac­cru­ing from 1st July 2027, with a min­i­mum with a 30% min­i­mum tax ap­ply­ing to the re­sult­ing net cap­i­tal gain.

3. As­sets ac­quired and dis­posed of from 1st July 2027 – cap­i­tal gains will be cal­cu­lated un­der the in­dex­a­tion method, with a 30% min­i­mum tax ap­ply­ing to the re­sult­ing net cap­i­tal gain.

But there is a little untold and not explained negative: the minimum tax gap amount.

What that is in simple terms: every investor regardless of their tax rate will have to pay 30% tax on that capital gain. Therefore, if your tax rate is lower than 30%, your tax will increase dramatically, as you will have to pay that minimum tax gap amount.

So let’s compare:

And then I found this example of part-time working spouse that just sold few shares:

As you can see, Labour party is really for people, because it is every-day people not the rich, that will be hit the hardest with those tax changes.

So consider receiving good financial planning advice before 1st July 2027. There is a lot at stake now.  Visit our webiste AboutRetirement.com.au and just book a meeting via BOOK A MEETING sign, then you can choose the date and time that suits you, and we can meet to discuss your financial situation, dilemma and possible solutions.

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement