From July 1 2027, the current 50% capital gains discount for individuals, partnerships and trusts disappears and a new inflation indexation model takes its place. Instead of halving gains, the system will tax only the real gain above inflation on assets sold after that date.
A minimum 30% tax rate will apply to capital gains on property and shares, changing long-standing assumptions for many investors. Assets bought before 1985, which have historically escaped capital gains tax, will also become taxable for the first time.
Under the new indexation approach, investors will deduct inflation from their capital gains before tax is calculated, aiming to stop tax being paid on purely nominal increases. Tax specialists say this will favour long-term holders in high-inflation periods but could reduce benefits compared with the existing discount for shorter holding periods.
Superannuation funds keep their current one third capital gains discount, preserving a key advantage of saving inside super compared with holding assets in personal names. Advisers are already modelling how the different rules for super funds, individuals and trusts might drive portfolio reshuffles before the 2027 start date.
Policy designers are grappling with how the reforms will hit early stage and start up businesses, which often rely on equity gains for returns rather than dividends or wages. Treasury plans to consult with industry and investor groups on carve-outs or tailored treatment to avoid punitive outcomes for high-risk innovative ventures.
Venture capital investors warn that higher effective tax on successful exits could blunt appetite for backing young companies. The government’s challenge is to clamp down on perceived capital gains concessions without undermining the pipeline of growth businesses that lean heavily on equity funding.
