The 50% capital gains tax discount is being scrapped from 1 July 2027 and replaced with two things: cost base indexation, and a 30% minimum tax on the gain. For anyone planning to sell an investment property after that date, this changes the after-tax number you walk away with, and not always in the direction you would guess.
How the old discount worked
Under the current system, hold an asset for more than 12 months and you halve the taxable gain. Sell a property with a $400,000 gain and you are taxed on $200,000 at your marginal rate. For a top-bracket investor, that put the effective tax on the gain at roughly 23.5%.
What indexation actually does
Cost base indexation works differently. Instead of halving the gain, it lifts your cost base by inflation over the period you held the asset, then taxes the rest. The logic is that you should not pay tax on growth that is only keeping pace with inflation. In a high-inflation stretch, that can shield a meaningful chunk of your gain.
The 30% floor is the catch
After indexation is applied, the gain is taxed at your marginal rate but no lower than 30%. For a top-rate investor whose effective rate on gains was about 23.5% under the old discount, a 30% floor is a clear increase on the taxable portion.
The pre-2027 gain is protected
Gains do not all fall under the new rules at once. Growth that accrued up to 1 July 2027 keeps the 50% discount. Only growth after that date is taxed under indexation and the minimum tax. When you sell, the gain is apportioned across the two periods.
JSC Property Investments helps you buy with the full picture, including how you'll eventually exit, alongside your accountant. Book a Kickoff Call with our team and let's plan it properly from the start.