On 12 May 2026, as part of the 2026–27 Federal Budget, the Government announced it would reform capital gains tax (CGT) arrangements.
These measures, which are now law, stipulate that the 50% CGT discount for individuals and trusts will be replaced with cost base indexation and a 30% minimum tax rate on capital gains that accrue from 1 July 2027 onwards.
To facilitate this, all CGT assets held on 30 June 2027 will undergo a deemed sale and reacquisition, enabling the calculations to be separated into two tranches – pre-1 July 2027 and post-30 June 2027.
For assets that have a readily ascertainable market value such as publicly listed shares, the deemed sale value will be automatically established based on closing market prices on 30 June 2027.
For all other assets such as property, business assets and unlisted investments, there are two options available in ascertaining the deemed sale value on 30 June 2027.
- Obtain a Market Valuation
- Adopt Treasury’s Prescribed Apportionment Methodology
Understanding the difference between obtaining a market valuation and using the Australian Taxation Office’s (ATO’s) prescribed apportionment method could have a significant impact on your future tax outcomes. Importantly, you don’t need to rush out and get a valuation on 1 July 2027. However, whilst valuations can be sought after that date (with effect from 1 July 2027), valuations of complex assets such as businesses may be less accurate and more likely to attract ATO attention if they are completed years later – potentially when the 2027 records aren’t all intact.
In addition to this, assets purchased on or before 20 September 1985 have historically been exempt from CGT. However, capital gains accruing on these assets from 1 July 2027 will become taxable under the new rules so obtaining an accurate market valuation for them is crucial.
What is the Prescribed Apportionment Methodology?
As an alternative to obtaining valuations of assets on 30 June 2027, the ATO will allow the use of a Prescribed Apportionment Methodology.
This method delays determination of an asset’s 30 June 2027 value until it is sold. It uses a formula to estimate the 30 June 2027 value by assuming a linear capital growth, compounding daily from the original purchase date to the eventual sale date.
Treasury has released a draft nine-step process to calculate the CGT allocation of capital gains between the current rules, and the cost base indexation rules that come into effect from 1 July 2027.
Importantly, the apportionment formula only applies daily growth to the first element of the pre-1 July 2027 cost base, being the original purchase price. This means that other elements of the cost base do not enjoy indexation benefits – such costs include transfer duty and renovation costs.
Which is the best option to use?
Each capital gain will need to be reviewed on its facts. In simple terms, a market valuation will generally lead to lower taxable capital gains where more of the asset’s capital growth occurs pre-30 June 2027. The asset’s history will also be relevant, for example if significant duty and renovations were made to a property, then indexation will not provide any benefit for those costs.
In most cases, it would be best to understand the impact of both alternatives to enable a proper comparison between the options.
Contact Pilot
If you would like to discuss the most appropriate option for your circumstances, please contact Kristy Baxter or Angela Stavropoulos on taxmed@pilotpartners.com.au or your Pilot Advisor on (07) 3023 1300.