CGT reform, timing and self-funded retirees: what investors should consider

The Government's capital gains tax reform package changes the way certain capital gains will be taxed from 1 July 2027. Broadly, the current 50% CGT discount is expected to be replaced for future gains by indexation of the cost base, together with a minimum 30% tax rate on real capital gains.

For assets already owned before 1 July 2027, the key planning issue is how gains are split between the pre- and post-commencement periods. This is particularly relevant for investors considering asset sales in the next few years, including self-funded retirees who may have planned to realise gains in lower-income years.

This issue may affect individuals, trusts and partnerships that hold CGT assets such as shares, investment properties, business assets, private company interests or trust interests.

It may be especially relevant to clients approaching retirement, self-funded retirees, business owners considering succession or sale, and clients with significant unrealised gains.

Under the current rules, eligible taxpayers may access a 50% CGT discount on assets held for at least 12 months. Under the new approach, gains accruing after 1 July 2027 are expected to be calculated using an indexation-based method, with a minimum 30% tax rate applying to real gains in some circumstances.

For many clients, the practical issue will be evidence. Assets held across the transition date may need support for market value or gain calculations. Listed securities may be easier to support with market data. Real property, business interests, private company shares and trust interests may require more careful valuation evidence.

The reforms may also reduce the benefit of deliberately selling assets in a low-income year if the minimum tax applies. That is why self-funded retirees and clients with variable income should review planned disposals early.

Clients should identify assets with material unrealised gains, consider whether valuation evidence may be required at 1 July 2027 and review any planned asset sales or restructures.

A sale should not be brought forward solely because of a tax change. Market conditions, transaction costs, funding needs, succession planning, retirement income and investment strategy should all be considered before any decision is made.

The final rules, transitional calculations, valuation requirements and exemptions should be verified before clients act. Main residence exemptions, small business CGT concessions, superannuation treatment, new build concessions and government payment carve-outs may alter the outcome.

If you are considering selling shares, property, business assets or other investments before or after 1 July 2027, please contact us so we can review the tax and commercial implications with you.