From 1 July 2027, the long-standing 50% CGT discount for individuals, trusts and partnerships is being replaced with a new system:
- Cost-base indexation: the cost of an asset is adjusted for inflation over the time it's held, rather than simply discounting the gain by half.
- A 30% minimum tax applies to the real (inflation-adjusted) gain.
Gains that built up before 1 July 2027 aren't affected. It's only growth from that date forward that falls under the new rules. In principle, that sounds straightforward. In practice, it creates a genuinely new problem for anyone holding an asset that has never had a "cost base" calculated for tax purposes at all, which is exactly the position most pre-CGT asset owners are in.
The pre-CGT surprise
Because pre-CGT assets have never needed a cost base, there was never a reason to calculate one, the reform effectively resets the clock. From 1 July 2027, these assets will be treated as if they were sold and immediately reacquired at their market value on that date. Everything up to that point stays tax-free. Everything after it is taxable under the new indexation and minimum tax rules.
A few things worth knowing:
- This applies to individuals, trusts and partnerships. Assets held inside companies aren't swept up by this change, as companies sit outside the new regime.
- Private company shares and trust interests need a closer look. Where a pre-CGT shareholding or trust interest sits over an entity that mostly holds post-1985 property, an existing integrity rule (CGT event K6) may already require a separate calculation at the 1 July 2027 transition point to identify any "latent" gain.
- The asset doesn't need to be sold for this to matter. The valuation point is fixed to the date, not to any transaction, so the rule applies whether or not you have plans to sell.
Why valuation is suddenly the important word
Because everything hinges on the asset's value on 1 July 2027, that valuation becomes the anchor for any tax payable in the future. Taxpayers will generally have two options for establishing it:
- A formal market valuation as of 1 July 2027, or
- A prescribed apportionment formula, which estimates the value based on the asset's growth rate over the time it's been held.
For straightforward assets, listed shares, for example, this is relatively simple. For anything complex, unique, or without an active market - a long-held family property, a stake in a private business, a rural landholding, a collection of assets - establishing a defensible market value is a much harder exercise, and one that may involve genuine judgement calls.
You don't need to panic-value everything right now
Here's the reassurance worth holding onto despite the significance of the 1 July 2027 date, there's no requirement to have every asset formally valued before then. Professional bodies have already flagged that a lot of confusion exists around exactly when a valuation needs to happen and the clarification is that, for many assets, this can be done retrospectively, at the point the asset is eventually sold, provided the valuation genuinely reflects market value as at the correct date.
In other words, the valuation obligation is real, but the deadline pressure many people assume exists - get it done by 30 June 2027 or miss out - generally isn't.
None of these calls for an immediate transaction or a rushed valuation. It does call for a clear picture of which of your assets are affected, and a plan for how and when you'll establish their value once the remaining detail is settled.
Talk to CMPartners
If you think this reform might impact your assets, get in contact with the CMPartners team. We'll help you understand your position now, so you're ready to act once the final guidance lands.
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