Capital gains tax (CGT) is back in the headlines, and this time, the conversation could lead to real changes affecting property investors across Australia. With Treasury reportedly examining options to scale back the 50% CGT discount ahead of the May federal budget, now is the time to understand what’s at stake.
Disclaimer: This article provides general information only and should not be considered tax advice. Investors should get independent guidance from a qualified tax professional when making financial decisions.
CGT is not a standalone tax; it’s part of Australia’s income tax system. It applies to the profit you make when you sell or dispose of an asset, such as an investment property, shares, managed funds or crypto assets. Your net capital gain is added to your taxable income and taxed at your marginal rate.
A few important rules apply:
The system as we currently know it has been in place since 1999, when the then federal government made a key change: the inflation-indexation model was replaced by a flat 50% CGT discount for individuals (and trust beneficiaries) who hold an asset for at least 12 months. Complying superannuation funds receive a 33.33% discount.
Here’s what that looks like in practice: If you (an individual or trust) hold an investment asset for more than 12 months, only half of the capital gain is included in your taxable income.
For example, you purchase an investment property for $1 million. You later sell it for $1.2 million. Your capital gain is $200,000. If you held the property for more than 12 months, only $100,000 would be added to your taxable income under the current capital gains tax discount.
Two developments have put capital gains tax reform back on the national agenda in early 2026.
First, a Senate Select Committee was established in November 2025 to examine the CGT discount, with a final report due in March 2026 that covers housing affordability, productivity, and the distribution of tax benefits across income groups.
Second, media reports indicate that Treasurer Jim Chalmers is considering scaling back the 50% CGT discount for investment properties in May 2026 when he announces the 2026-27 federal budget. Treasury told a Senate hearing in February 2026 that around 95% of the value of the CGT discount flows to residential property investors, who tend to hold assets longer and accumulate larger gains.
The debate is centered on intergenerational inequality. Critics argue the discount, especially when combined with negative gearing, has given investors a structural advantage, making it harder for first home buyers to compete.
That said, economists are divided. Former Reserve Bank of Australia (RBA) governor Philip Lowe told the Australian Financial Review that the proposed change is “very modest”, while others note Australia’s housing shortage is fundamentally a supply-side problem that tax changes alone won’t solve. During the February 2026 hearing, Treasury cited external economic research that suggests the discount and negative gearing combined may have pushed prices up by just 1-4%.
No formal policy has been announced, but options being discussed include:
However, until the government announces a policy position, the final structure of any reform remains uncertain.
If the CGT discount is reduced, there could be implications for your investment strategy.
A reduced discount means a larger share of your capital gain becomes taxable income. On a significant gain, the difference in your tax bill could be substantial.
If selling becomes more tax-intensive, investors may place even greater emphasis on long-term holding strategies. Holding property for longer periods can help maximise capital growth while spreading tax obligations over time.
Property investment decisions may increasingly focus on rental yield, cash flow, and income stability rather than relying primarily on future capital gains. This shift could encourage investors to prioritise properties with stronger rental performance.
How you hold assets, whether in your personal name, a trust or a company, affects CGT calculations and available discounts. A company, for example, receives no CGT discount at all. With potential changes ahead, reviewing your investment structure with your accountant could be useful.
Whenever tax policy is under review, it can create a period of uncertainty in the market. Some investors may delay decisions while waiting for clarity on the future of capital gains tax on property. Others may accelerate transactions before potential changes take effect.
The most important thing is not to make reactive decisions based on speculation. Policy details matter hugely, and until legislation is confirmed, major portfolio moves should be considered carefully.
What is worth doing now is talking to your mortgage broker, accountant and financial adviser about how your investment property portfolio is structured and what different scenarios could mean for your position. If any CGT reform does happen, it is unlikely to apply retrospectively. But being informed and prepared puts you in a far stronger position than waiting to react.
Shore Financial can help you understand how potential changes to capital gains tax could affect your investment strategy, loan structure and long-term returns. To discuss your situation, call us on 1300 416 700, email info@shorefinancial.com.au or fill in this online form.
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