Discount or indexation — which saves more tax?

Assumes an individual investor, 2.5% p.a. CPI indexation and no prior capital losses, and assumes $45,001 of other taxable income in the sale year (the bottom of the bracket of a 32% marginal rate including Medicare), with the gain taxed through the brackets on top of it — your real numbers may differ. Your gain is split at 1 July 2027 the way the Act’s deemed sale requires (purchase date implied by sale date minus years held): the part up to the asset’s value on that date keeps the 50% discount, and that value, indexed, is the cost base from then on. The 1 July 2027 value is estimated from this calculator’s growth assumption, because the value the Act uses is the asset’s market value on that date, which this calculator cannot know. The Act’s own transition is a deemed sale on 30 June 2027 and reacquisition on 1 July 2027, at market value or at a method the Minister may determine (sections 112-155 and 112-185). No determination under s 112-185 had been made (checked 16 October 2026); Treasury released a draft for consultation on 3 August 2026 (closed 21 August); a draft is not law and the method would be a choice. The draft method assumes the asset grew at one steady compound rate from its purchase price to the sale price, which is what this calculator estimates, and agrees with our estimate within $200 on the scenarios we tested. Dates are read to the calendar month (a sale on 30 June 2027 counts as 1 June 2027). The 50% discount, which is kept on the pre-2027 slice, also applies to new residential dwellings (with a choice of indexation instead), and the affordable housing discount of up to 60% is retained — not modelled by this slider set. This is enacted law — Acts No. 49 and 50 of 2026, Royal Assent 26 June 2026 — not a Budget proposal. Indexation starts on 1 July 2027 for an asset held then (the Act treats it as reacquired that day: sections 110-36(1A) and 112-155(2)(b)); here it runs from that date on the estimated value above, not from your purchase date. Indexation is compounded annually here; real indexation uses the ATO’s published quarterly CPI index numbers, so the figure is indicative. This tool applies the 30% minimum tax in every case; by law it applies to resident individuals and not in a year the person receives the Age Pension or listed income-support payments (s 119-15), so figures for Age Pension recipients are overstated. This widget takes one cost base and no capital works deductions. Capital works deductions after 1 July 2027 come off the indexed cost base, unindexed, as the Property vs Shares calculator models it; the Act does not settle whether each deduction should instead reduce the balance when it is claimed, with the reduced balance indexed from then on (s 114-15(3)), which would raise the tax further. Indicative only. Not financial advice.

Capital gains tax rate: The gain in the sale year is added to $45,001 of other taxable income (the bottom of the bracket of the 32% rate this tool assumes) and taxed through the resident rates for that income year, plus 2% Medicare and the 30% minimum-tax top-up on the part from 1 July 2027. The brackets are held at their legislated values for every future year, so real bracket creep is not modelled. Offsets such as the low income tax offset (LITO) and the seniors and pensioners tax offset (SAPTO) are ignored, and all assets are sold in the final year as one lump. See the worked example.