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Kooky
Builder of Shaka, the payment router that pays every agent their commission on closing date.
About Kooky and Shaka →The Australian Taxation Office updated its page on the federal tax changes on Monday 29 June 2026 with a short sentence: "These measures are now law." From 1 July 2027, the page says, the 50 per cent capital gains tax discount for individuals, trusts and partnerships is replaced with indexation of the cost base and a minimum tax rate of 30 per cent on capital gains, and the new method applies only to gains that build up after that date.
Most of the coverage since Budget night has been about investors and negative gearing. The capital gains half of the law reaches further, to anyone who may one day sell a property that is not fully covered by the exemption for a main residence: a holiday house, a block of land, a former home that was rented for years, a house with a granny flat let to a tenant. For the home a family simply lives in, nothing changes. The Budget's tax explainer says so in one line, and the wealth manager Perpetual, in a summary published on 1 July, describes the exemption as continuing in full for eligible individuals.
ATO, tax reform page updated 29 June 2026; Budget 2026-27 tax explainer on negative gearing and capital gains tax.
What the law changes
Capital gains tax is not a separate tax. A capital gain is added to a person's income in the year a contract of sale is signed and taxed at their marginal rate. Since 1999 an individual who has held an asset for at least a year has counted only half the gain. That halving is the discount the new law removes.
Related readCourt fines foreign owner $508,000 for leaving a block unbuiltIn its place come two rules, described in the Budget's tax explainer. The first is indexation. The cost of the asset is adjusted upward for inflation, using the consumer price index in a similar way to the arrangements in place between 1985 and 1999, so that only the gain above inflation, the real gain, is taxed. It applies to assets held for at least 12 months.
The second is a floor. A minimum tax rate of 30 per cent applies to real capital gains that accrue from 1 July 2027. The explainer says it will not affect people whose gains are already taxed at 30 per cent or more. It bites on those with low taxable incomes in the year of sale, who under the current system could pay very little on a gain.
The explainer gives an example of the floor. A taxpayer with $25,000 of other income in 2029-30 who realises a $10,000 gain would ordinarily pay $1,400 on it, a rate of 14 per cent. Under the minimum tax he pays a further $1,600, which brings the rate on the gain to 30 per cent. People who receive a means-tested income support payment, such as the Age Pension or JobSeeker, at any time in the financial year are exempt from the minimum tax.
The family home is outside all of it
The exemption for a main residence is the reason most Australians never deal with capital gains tax on property, and the law leaves it where it was. The explainer's wording is that the main residence will continue to be exempt for capital gains tax purposes.
Related readThe ATO clearance certificate every Queensland seller now needsThe ATO's guidance on the exemption, updated on 22 June 2026, sets out what a full exemption requires. The dwelling must have been the home of the owner, their partner and other dependants for the whole period of ownership. It must not have been used to produce income, which the ATO spells out as not having run a business from it, rented it out or "flipped" it. And it must be on land of two hectares or less.
Whether a place is a main residence is a question of fact. The ATO lists the signs it looks at: the owner and family live there, their belongings are there, mail is delivered there, it is the address on the electoral roll, and services such as gas and power are connected.
A Queensland household that buys a home, lives in it throughout and sells it meets all three conditions, and the sale is disregarded for tax whatever the gain and whichever method applies to everyone else.
Homes that are only partly exempt
The change matters to owners whose home falls short of the full exemption, because the taxable part of their gain will be worked out under the new method for growth after 1 July 2027.
The ATO's guidance identifies the common cases. Renting out part of a home, or running a business from it, produces a partial exemption. The test is whether the owner would have been entitled to deduct interest on a home loan for the part used to earn income, and the taxable share follows the floor area and the period involved. The ATO's own example is a house bought for $300,000 in 2003 and sold for $700,000 in June 2026, with 35 per cent of it treated as income-producing throughout: the assessable gain is $140,000, which the discount then halves to $70,000.
Related readGold Coast holds its rates rise to 4.7 per cent after dropping 5.7A former home is another case. An owner who moves out can choose to keep treating the property as their main residence, indefinitely if it is not rented and for up to six years if it is, provided no other property is treated as their main residence for the same period. Beyond six years of renting, part of the gain becomes taxable.
A home that was rented first and lived in later is taxable for the rented share of the ownership period. The guidance works through an example of a property rented for 1,004 of the 4,564 days it was owned, which made 22 per cent of a $230,000 gain assessable.
The discount in the ATO's examples applies to gains up to 30 June 2027
Each of the ATO's worked examples for partly exempt homes ends by halving the assessable gain. For a sale after 1 July 2027, the Budget's explainer says the 50 per cent discount will apply to the gain built up to that date, and indexation and the minimum tax to the gain after it.
How a gain is split at 1 July 2027
Nobody has to sell before the start date to keep the discount on growth that has already happened. The transition divides each gain in two at 1 July 2027.
- Up to 30 June 2027The gain between the cost base and the value at 1 July 2027 keeps the 50 per cent discount.
- At 1 July 2027The value on that day is fixed by a valuation or by a specified apportionment formula.
- From 1 July 2027Growth after that value is indexed for inflation and subject to the 30 per cent minimum.
The explainer says taxpayers can either seek a valuation of the asset as at 1 July 2027 or use the apportionment formula, and that the ATO will provide tools to estimate the value. Its example is an investor whose property is worth $500,000 on 1 July 2027 and sells for $560,000 two years later. With inflation of 2.5 per cent a year, the taxable gain for the later period is $34,688, on which tax at the top rate is $16,303. Under the discount it would have been $14,100. The gain before 1 July 2027 is taxed as it would be today.
The law also brings in assets bought before capital gains tax began on 20 September 1985, which have been outside the system entirely. Perpetual's summary notes that gains on those assets up to 1 July 2027 remain exempt, and that increases in value after that date become taxable. For a family that has held a beach house or a farm block since the early 1980s, the value on 1 July 2027 becomes the starting point for tax where there was none.
Related readGST and Queensland property: new homes, vacant land, margin schemeWho pays more and who pays less
Indexation is not harsher than the discount in every case. It depends on how fast the asset grows against inflation. The Budget's explainer sets three owners side by side, each buying a $500,000 asset in July 2027 and holding it for ten years with inflation at 2.5 per cent a year.
| Annual growth | With indexation | With the 50% discount |
|---|---|---|
| 2.5% | Nil | $70,021 |
| 5% | $174,405 | $157,224 |
| 7.5% | $390,474 | $265,258 |
Budget 2026-27 tax explainer on negative gearing and capital gains tax. Illustrative figures, not forecasts.
An asset that only keeps pace with inflation produces no taxable gain at all under the new method, where the discount would have taxed half of a gain that was not real. At 5 per cent a year, which the explainer treats as typical for residential property, the taxable gain is about $17,000 higher than under the discount, and the explainer puts the extra tax at $8,075. At 7.5 per cent the gap widens to more than $125,000 of taxable gain and $58,851 of tax.
The explainer also looks backwards. Had indexation applied over the past 20 years, it says, the effective tax rate on a house held for ten years would have been 30.1 per cent for a top-rate taxpayer, and on a unit 23.5 per cent, against the 23.5 per cent that halving a gain produces at a 47 per cent marginal rate. Houses, which grew faster, would have paid more; units about the same.
That history carries a Queensland point. The land values the Valuer-General issued this year rose by an average of 24 per cent on the Sunshine Coast and 37 per cent in Noosa, according to Sunshine Coast News, and the owners most exposed to the new method are those holding fast-growing property that is not their home.
Related readHome concession now asks for citizenship: what changes for moversWhat has not yet been written
The ATO page is brief, and it refers readers to the Budget explainer and the Acts for detail. Several things an owner would want to know are not in the material published so far.
The apportionment formula that can be used in place of a valuation has been described but not published in final form. The tools the ATO has promised for estimating a value at 1 July 2027 do not yet exist. And neither the ATO page nor the explainer sets out how the partial main residence exemption is to be combined with the split at 1 July 2027 for a home that has been partly income-producing across both periods. The principle is clear enough, discount before and indexation after, but the calculation for a home with a rented room or a few years of tenancy is one the published guidance has yet to illustrate.
Investors in new builds are treated separately. The explainer says they will be able to choose, when they sell, between the 50 per cent discount and indexation with the minimum tax.
What an owner can do now
The practical consequence for most owners is record-keeping, not action. The ATO's guidance on homes used to produce income already says a market valuation is needed at the time a home is first rented or used for business, where that happened after 20 August 1996, because the owner is generally taken to have acquired the home at that time for tax purposes. The same habit of fixing a value at a date is what the 2027 transition will require of every owner of a taxable property.
For a home that is and remains a main residence, there is nothing to do. For a property that is taxable in part or in whole, the dates of moving in and out, the periods of tenancy, the floor area let and the costs of buying and improving are the facts the calculation will rest on, under the old method and the new.
The rules start in twelve months. How a particular sale will be taxed depends on the owner's circumstances, and the estimating tools the ATO has promised are the next thing to watch for.
Kooky, from Shaka
Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.
