From 1 July 2027, the 50% CGT discount is replaced by indexing your cost for inflation, with a 30% minimum tax on the gain. It’s law: the changes received Royal Assent on 26 June 2026. For ETF investors the key point is that gains made before 1 July 2027 keep the 50% discount whenever you sell, so there’s no need to rush to sell. Gains after that date will usually be taxed more heavily for growth ETFs, while super funds keep their one-third discount.
Australia’s biggest change to capital gains tax since 1999 has passed Parliament. If you hold ETFs in your own name, it changes how much tax you’ll pay when you sell, and it changes some of the maths on where you hold your investments. Here’s what’s changing, what isn’t, and what it means for ETF investors.
1. What’s changing
Today, if you hold an ETF for at least 12 months before selling, you pay tax on only half the gain. That’s the 50% CGT discount, which has applied since September 1999.
For gains made from 1 July 2027:
- Indexation replaces the discount. Your cost base is increased by inflation (the CPI) between when you bought and when you sell, and you’re taxed on the gain above that. In other words, only the “real” gain is taxed, but all of it is taxed.
- A 30% minimum tax applies to the gain. If your marginal tax rate is below 30%, the gain is still taxed at 30%. If you’re on 30% or more, nothing extra applies. Income support recipients, including Age Pensioners, are exempt from the minimum tax.
- You still need to hold for 12 months. Indexation only applies to assets held for at least 12 months, as the discount does now.
- Indexation can’t create a loss. If inflation is more than your gain, you don’t get a capital loss from indexing.
The two bills, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026, received Royal Assent on 26 June 2026. Some details, including the ATO’s formula for valuing assets at 1 July 2027, are still to come.
2. The gain you’ve already made keeps the discount
This is the part most people get wrong. The new rules don’t apply to gains made before 1 July 2027, including the gains you already have today. If you hold an ETF on 1 July 2027, it’s treated as if you sold and bought it back at its market value that day, for tax purposes only. When you eventually sell, the gain is split in two:
Current rules. Held 12 months or more? You still get the 50% discount, even if you sell years later.
New rules. Your cost is indexed for inflation instead of halving the gain, and a 30% minimum tax applies to the gain.
For an ASX-listed ETF, the 1 July 2027 value is easy to find: it’s the quoted market price. (Unlisted assets like property need a valuation or the ATO’s formula.)
3. A worked example
Say you put $100,000 into a broad share ETF in July 2022. By 1 July 2027 it’s worth $150,000, and you sell in July 2032 for $220,000.
Under the new rules you’re taxed on about 25% more of the gain in this example, because a 50% discount is worth more than an inflation adjustment when an ETF grows well above inflation. The first $50,000 of gain (before July 2027) is treated exactly as it is today.
4. Who pays more, and who might pay less
Indexation removes inflation from your gain. The 50% discount removed half of it. Which is better depends on how much of the gain is inflation:
- Growth ETFs such as VGS, IVV, NDQ or VAS: share returns have usually been well above inflation over the long run, so most investors will pay more tax on future gains.
- Low-growth assets such as some bond ETFs, or assets that mostly keep pace with inflation, may pay less, because most of the gain is inflation.
- Lower-income investors are hit hardest by the 30% minimum. Someone on a marginal rate below 30% who sells an ETF for a gain will still pay 30% on the post-2027 gain, unless they receive income support such as the Age Pension.
- Investors on 37% or 45% lose the discount, but the 30% minimum doesn’t change their rate.
5. What it means for ETFs specifically
Capital gains distributions
ETFs pass on capital gains they make inside the fund when they sell shares, usually in the June distribution. Gains realised by the fund after 1 July 2027 will flow through to you under the new rules, and the 30% minimum applies in your hands. Trustees will have to split capital gains on your tax statement by type, so expect your AMIT member annual (AMMA) statement to look different.
This makes turnover matter more. Broad index ETFs like A200, VGS or BGBL rarely sell shares, so they tend to distribute few capital gains. Active ETFs and funds that trade more often usually distribute more, and those gains will now be taxed more heavily.
Each parcel has its own dates
If you add to an ETF regularly or reinvest distributions, each parcel has its own purchase date and cost. Parcels held on 1 July 2027 are split into before and after; parcels bought after that date are fully under the new rules. Good records, or a tool like Sharesight, will save your accountant a lot of time.
AMIT cost base adjustments still matter
ETFs adjust your cost base each year for tax-deferred amounts. That doesn’t change, but it now feeds into an indexed cost base after 1 July 2027, so keep every annual tax statement.
6. What isn’t changing
- Super, including SMSFs. Complying super funds keep their one-third CGT discount, so a gain in super is still taxed at an effective 10% (and nil in pension phase, within the limits). For long-term growth ETFs, super’s tax advantage over holding in your own name gets bigger. See best ETFs for SMSFs.
- Companies. They never had the discount and don’t get indexation.
- Your home. The main residence exemption stays.
- Borrowing to invest in ETFs. The negative gearing changes apply to established residential property, not shares or ETFs. Interest on money borrowed to buy income-producing ETFs can still be deductible. More in offset account vs ETFs.
- Capital losses. You can still use them against gains, with new rules on which gains they’re applied to first.
Separately, a 30% minimum tax on discretionary (family) trusts is proposed from 1 July 2028, and new rules for that are still being consulted on. Widely held trusts like ETFs are excluded.
7. What ETF investors can do now
- Don’t panic-sell before July 2027. Your existing gains keep the discount whether you sell or not.
- Note your ETF prices on 1 July 2027. Your broker or registry statements should show them, but it’s worth keeping your own record.
- Think about where new money goes. With the gap between super and personal tax on gains widening, the choice between contributing to super and investing in your own name is worth revisiting with your adviser.
- Favour low-turnover core ETFs. A diversified, low-cost index core distributes fewer capital gains each year. See core and satellite investing.
- Size satellites with tax in mind. Shorter-term trades already miss out on the discount if held under 12 months. After July 2027, every gain is taxed more fully, so the case for each trade has to be stronger.
- Get advice on your situation. Low-income retirees not on the Age Pension, people with family trusts, and anyone planning a big sale should check how the rules apply to them.
Our free portfolio report shows your overlap, real top holdings, fees and performance against DHHF and A200.
Sources
- Perpetual: Capital gains tax changes explained
- MLC Technical: Capital gains tax changes from 1 July 2027 (29 June 2026)
- PwC: Federal Budget 2026–27, investment measures
- Findex: CGT discount changes from 1 July 2027
General information only, not tax advice. It doesn’t consider your objectives, financial situation or needs. Tax rules described are as legislated at the date of publishing; some details are still subject to ATO guidance and further legislation. Examples are illustrations based on stated assumptions. Speak to a registered tax agent or adviser about your own circumstances. ETFs named are examples, not recommendations.
Frequently asked questions
What are the CGT changes from 1 July 2027?
From 1 July 2027, the 50% capital gains tax discount for assets held 12 months or more is replaced by indexing the cost base for inflation (CPI), and a 30% minimum tax applies to capital gains made after that date. The changes passed Parliament and received Royal Assent on 26 June 2026.
Do I lose the 50% CGT discount on ETFs I already own?
No. Gains made up to 1 July 2027 keep the 50% discount (if the ETF has been held 12 months or more), even if you sell later. Only the part of the gain made after 1 July 2027 is taxed under the new indexation rules.
Should I sell my ETFs before 1 July 2027?
Not purely for tax. Because gains made before 1 July 2027 keep the 50% discount whether you sell or hold, selling early mainly brings your tax bill forward. Base the decision on the investment, and get advice for large or complex situations.
How will my ETF be valued on 1 July 2027?
For ASX-listed ETFs, the quoted market price on 1 July 2027 can be used. That value splits your gain into the part taxed under the old rules and the part taxed under the new rules.
What is the 30% minimum tax on capital gains?
If your marginal tax rate is below 30%, capital gains made after 1 July 2027 are still taxed at 30%. If your rate is 30% or more, it makes no difference. Income support recipients, including Age Pensioners, are exempt.
Do the CGT changes apply to super and SMSFs?
No. Complying super funds, including SMSFs, keep their one-third CGT discount for assets held at least 12 months.
Will I pay more tax on ETFs under the new rules?
For most growth ETFs, yes, on gains made after 1 July 2027, because a 50% discount is usually worth more than an inflation adjustment when returns are well above inflation. Assets that grow at around the rate of inflation may pay less.