CGT Planning After the 2026 Budget: Property vs Shares

Author: Tepuy Solutions | Published: July 2025 | Updated: August 2, 2026
Category: Investment Taxation, Financial Planning

Overview

This article examines the capital gains tax (CGT) implications under Australian tax law when disposing of long-held investment property versus shareholdings. We explore the structural, timing, and ownership flexibility of each asset class, including strategic tax planning options, parcel sales, ownership restructuring, and the use of trusts. The analysis aims to inform long-term investors about optimal exit strategies that balance return maximisation with tax efficiency.

1. Introduction

Investment properties and shares are two of the most common assets held by Australian investors. While both are subject to CGT, the taxation mechanics, flexibility, and planning strategies differ significantly. The nuances of ownership structures, holding periods, partial disposals, and ability to manage taxable events shape the after-tax outcomes of each investment.

2. Capital Gains Tax Basics in Australia

• Capital gains are added to your assessable income in the year of the asset's disposal.
• Companies do not receive a CGT discount, under either the old or new regime.
• CGT applies to the difference between the asset's cost base and its sale proceeds, minus applicable costs (e.g., legal, stamp duty, brokerage, agent fees).

2.1 The pre-reform basis (gains from CGT events before 1 July 2027)

Under the rules that have applied for the past two decades, individuals and trusts receive a flat 50% CGT discount if the asset is held for more than 12 months before disposal. Under the Act as passed it continues to apply to gains from CGT events before 1 July 2027, whenever the asset was purchased. There is no purchase-date carve-out for the CGT discount: the test is the date of the CGT event, not the date you bought. (The 12 May 2026 Budget-announcement date is the cut-off for the separate negative gearing limitation, not for CGT.)

2.2 The post-reform basis (gains accruing from 1 July 2027, whenever the asset was purchased)

Acts No. 49 and 50 of 2026 replace the 50% discount with a different mechanism for gains accruing from 1 July 2027, for all individuals, trusts and partnerships regardless of when the asset was purchased:

• CPI cost-base indexation replaces the flat 50% discount — the asset's cost base is adjusted upward for inflation (CPI) over the holding period, reducing the taxable gain to its real (inflation-adjusted) value rather than an automatic half.
• A 30% minimum tax applies to the real (indexed) gain — regardless of the investor's marginal rate, at least 30% of the real gain is paid as tax.
• Who's affected: individuals, trusts, and partnerships.
• Superannuation funds are not affected — the existing super CGT treatment (15% in accumulation phase, 0% in pension phase) continues unchanged.
• New builds are the one exception for property: a new-build purchase can choose whichever method — the old 50% discount or the new indexation-plus-minimum-tax method — produces the better outcome.

For an asset held across the 1 July 2027 commencement date, the gain is split: the portion accrued up to 30 June 2027 gets the old 50% discount, and the portion accrued from 1 July 2027 onward is taxed under the new indexation-plus-minimum-tax method.

3. Selling Investment Property: Tax Implications

3.1 Full vs Partial Disposal

Investment property must typically be sold in full. Partial sales are not practically viable unless the land title is subdivided, which involves council approvals, significant costs, time delays, and capital gains events on each subdivided title. Thus, investors cannot "sell part of a house" to realise a partial gain for tax smoothing.

3.2 One-Off CGT Event

Property sales create a single, large CGT event. This can push the investor into the top marginal tax bracket in the year of sale. For example, under the 50% discount (still applicable to CGT events before 1 July 2027), an individual realising a $400,000 gain would add $200,000 to their income, taxed at rates up to 45% plus Medicare levy. For gains accruing from 1 July 2027, whenever the property was purchased, the taxable amount instead depends on CPI indexation and the 30% minimum tax on the real gain (see Section 2.2) — the arithmetic is different and generally results in a higher taxable amount for gains with low inflation-adjusted growth.

3.3 Ownership Transfers Midway: ATO Risks

Changing ownership mid-way (e.g., transferring a share to a spouse on a lower tax bracket) triggers a CGT event at the time of transfer, based on market value. No "rollover relief" exists for personal investment properties (unless under family law / divorce / death). Therefore, transferring 50% of a property to a spouse after many years does not reset ownership and may result in an immediate capital gain. Some investors use family discretionary trusts or tenants-in-common arrangements early on to split ownership and manage future tax. However, retrospective restructuring is generally ineffective or costly.

3.4 Deductions and Depreciation Recapture

Capital works and depreciation claimed over the years reduce the cost base, thus increasing the capital gain. The more depreciation claimed, the higher the gain upon sale. This makes long-term property holding slightly more tax-inefficient than it appears.

4. Selling Shares: Tax Implications

4.1 Parcel-Based Flexibility

Shares can be sold in portions (known as "parcels"), offering significant tax planning flexibility. This allows CGT gains to be spread over multiple financial years, disposal of lowest-gain or highest-cost-base parcels to reduce tax, and tactical realisation of losses to offset gains (loss harvesting). Most brokers use FIFO (first-in-first-out) by default, but the ATO allows specific identification of parcels if proper records are maintained.

4.2 CGT Discounts and Structures

The same regime split described in Section 2 applies to shares, and it is a timing split, not a purchase-date one: gains from CGT events before 1 July 2027 keep the 50% discount after 12 months, and gains accruing from that date are taxed under CPI indexation plus the 30% minimum tax, whenever the shares were bought. Shares held by companies pay full corporate tax (no CGT discount, under either regime). Trusts can distribute capital gains and allow streaming to lower-income beneficiaries. SMSFs in accumulation phase pay 15% CGT, and 0% in pension phase (a major advantage, unaffected by the 2026-27 reform).

4.3 Ownership Flexibility

Unlike property, shares can be easily transferred between parties or entities at market value. Transfers trigger CGT events, but can be used strategically: selling to a family trust early in the holding period, holding in superannuation for concessional CGT treatment, or structuring to allow income splitting. Moreover, shares can be gifted, inherited, or transferred more easily without disrupting the asset itself.

5. Strategic Comparison Table

The CGT rows below split on when the CGT event happens, not on when the asset was bought — there is no purchase-date test for the CGT discount. The negative gearing row is the one that does turn on the 12 May 2026 purchase date. Everything else in the table is unaffected by the 2026-27 reform.

6. Key Tax Planning Takeaways

• Selling property is rigid: a one-time, high-impact CGT event with limited flexibility.
• Selling shares offers timing, parcel, and ownership structure strategies that can reduce tax.
• Long-term property investors must plan the ownership structure from day one (e.g., joint ownership, trusts) to gain tax efficiency.
• Share investors have more post-facto planning tools.
• If you are selling before 1 July 2027 — the 50% discount still applies, whenever you bought. The timing of a future sale relative to the 1 July 2027 commencement date matters if you're holding across that line.
• If you're buying a new build — you can choose the 50% discount or CPI indexation, whichever produces the better outcome for your holding period and expected inflation. Model both scenarios before committing.
• If any part of your gain will accrue on or after 1 July 2027 — plan your exit around CPI indexation plus the 30% minimum tax for that part, not the 50% discount. This applies however long you have held the asset. If you are buying an established property after 12 May 2026, note separately that negative gearing losses will be quarantined to rental income from 1 July 2027.
• Super remains the most tax-efficient vehicle for capital gains — 15% CGT in accumulation phase, 0% in pension phase. Unaffected by this reform.

7. Final Notes and Recommendations

For investors considering exiting long-held investments:

• Use multiple-year planning if possible—especially for property sales, coordinating with income years of lower taxable income.
• Model the after-tax proceeds, not just headline gains.
• Consider the implications of trust distributions, loan balances, and depreciation clawback.
• Consult with a tax professional before making structural changes.

Disclaimer

This article reflects Australian tax law as at August 2026, including changes announced in the 2026-27 Federal Budget (Acts No. 49 and 50 of 2026). CGT and negative gearing reforms are now law. This is general information only — not financial or tax advice. Seek independent advice.