The Proposed CGT Changes is worse for everybody and especially lower income folks.

The Proposed budget replaces the 50% CGT discount with CPI indexation + a 30% minimum tax floor on all capital gains from 1 July 2027. The government says it targets the wealthy. The numbers say it hits low-to-middle income investors hardest, proportionally. And the "means-based support exemption" has a giant hole in it that most families with a working partner will fall straight through.

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  What Actually Changed

  

 Current system: Assets held 12+ months get a 50% discount on the capital gain, which is then added to your income and taxed at your marginal rate.

 New system (from 1 July 2027):

  - Your cost base is indexed by CPI (inflation adjusted)

  - The gain above that inflated cost base is the taxable amount

  - A 30% minimum tax floor applies — you cannot pay less than 30% on your real gain regardless of your income bracket

  - If your marginal rate is above 30%, you pay that instead

 Who's grandfathered:

 - Assets bought before Budget night (7:30pm AEST 12 May 2026) — 50% discount still applies to pre-July 2027 gains

 - New builds — investors can choose either the old or new system

 - Main residence, small business CGT concessions, 60% affordable housing discount — untouched (supposedly)

 Means-tested exemption: Age Pension and JobSeeker recipients are exempt from the 30% minimum floor in years they realise a gain. We'll explain why this is much narrower than it sounds.

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  The 2026-27 Tax Brackets (Including Medicare Levy)

$0 – $18,200	0%
$18,201 – $45,000	17%
$45,001 – $135,000	32%

$135,001 – $190,000	39%
$190,001+	47%

 How some Australians are affected.

  

For all examples: Asset bought for $200,000, sold for $400,000 ($200k nominal gain). Inflation over holding period: 25%. Indexed cost base: $250,000. Real gain after indexation: $150,000.

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  Persona 1 — Growth Investor, Middle Income ($90,000 salary, 30% marginal rate)

  Under the old system:

  - Taxable gain: $200k × 50% discount = $100k

  - Tax: $100k × 30% = $30,000 (15% effective rate on nominal gain)

  Under the new system:

  - Real gain: $150k

  - Tax: $150k × 30% (floor = marginal rate here) = $45,000 (22.5% effective)

  - Extra tax paid: +$15,000 — a 50% increase in CGT on the same transaction

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  Persona 2 — Low Income, Early Career ($32,000 salary, part-time worker and side investor, 15% marginal rate)

  Under the old system:

  - Taxable gain: $200k × 50% = $100k

  - Tax: $100k × 15% = $15,000 (7.5% effective rate)

  Under the new system:

  - Real gain: $150k

  - The 30% floor kicks in — their marginal rate of 15% is irrelevant

  - Tax: $150k × 30% = $45,000 (22.5% effective)

  - Extra tax paid: +$30,000 — a 3× increase

This person earns $32k. They've been responsible, invested long-term, and are now taxed at the same effective rate as someone earning $135k. That is not progressive taxation. That is regressive.

Someone in the comments will say: People Earning 32,000 don't invest 200k. So don't focus on that number: Ask yourself why a low income individual has to pay 3x the tax in 2027 they did in 2026?

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Persona 3 — Self-Funded Retiree ($45,000 income from brokerage and dividends, not on Age Pension)

  

This person built wealth outside super, either before it was around or because they were self-employed, or couldn't use super for various reasons. They are NOT on the Age Pension because they have savings — the exact behaviour government policy has always encouraged.

  Under the old system: $30,000 tax

  Under the new system: $45,000 tax — +$15,000 per asset sale

Multiply across a portfolio of 10–15 assets sold over 15 years of retirement drawdown: $150,000–$225,000 in additional lifetime tax burden for someone who deliberately took pressure off the pension system.

Are they exempt? No. Not on Age Pension (too much saved), not on JobSeeker (not unemployed). Nothing.

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  Persona 4 — Gen Z Investor, 24 years old ($55,000 salary, ETF investor, 30% marginal rate)

  

  Gen Z has been told the old generation locked them out of property, so they invested in shares and ETFs instead. Smart. Responsible. Long-term thinking. This policy punishes that exact

  behaviour.

  Assume $10,000/year invested from age 24, 8% compound growth, sold at 54 (30 years):

  Portfolio value:           ~$1.13M

  Nominal cost base:         ~$300k

  Indexed cost base (3% pa): ~$476k   ← not $729k

  Nominal gain:              ~$833k

  Real gain:                 ~$657k

  At 30% bracket — even at their current income level, the new system is significantly worse:

  

  - Old system: $833k × 50% × 30% = $124,900

  - New system: $657k × 30% = $197,100

  - Extra tax: +$72,200 — 58% more CGT

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International Comparison: How Australia Stacks Up

  

 Effective long-term CGT rates on shares/equities held 12+ months, after any applicable discounts

  Australia (current):    23.5% max effective (50% discount × 47% marginal)

  Australia (proposed):   30% MINIMUM, up to 47% on real gains for high earners, indexed to CPI.

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  United States:          0% / 15% / 20% long-term + 3.8% NIIT (income-based)

  United Kingdom:         10% basic rate / 20% higher rate (shares)

  Germany:                ~26.4% flat (25% + solidarity surcharge)

  France:                 30% flat (12.8% income + 17.2% social levies)

  Canada:                 ~15–24% (50% or 66.67% inclusion × marginal rate)

  New Zealand:         0% — no CGT at all

  Singapore:              0% — no CGT at all

  Japan:                  ~20% flat (15% national + 5% local)

  Hong Kong:              0% — no CGT at all

 Australia's proposed system puts us ahead of Germany, the US, and UK in CGT burden — while every major competitor in our own region (Singapore, Hong Kong, NZ, Japan) either has zero CGT or a flat rate well below our new floor. For a 45% bracket Australian selling shares with high real gains, they're paying nearly double the UK rate.  For professionals looking to make a long term career and wealth choice, brain drain is a real concern.

  

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The Retirement Safety Net Problem

  

Australia's retirement system has three pillars: the Age Pension, superannuation, and private savings outside super. This policy attacks pillar three significantly.

 Why that matters:

 - Super caps are limited — $30k/year concessional, $120k/year non-concessional. Plenty of Australians build wealth beyond these caps.

 - Super pension phase: 0% tax on gains. Super accumulation phase: ~10% effective CGT. Private brokerage now: 30% minimum. The gap just got enormous.

 - This creates a massive incentive distortion: put everything into illiquid super and PPOR property, avoid accessible brokerage investing (at least high growth shares). That is bad for financial flexibility and retirement resilience.

 - Self-funded retirees who built brokerage portfolios to stay off the pension are being penalised for doing exactly what successive governments asked of them.

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The Fairness Problem: The Means-Tested Exemption Is Narrower Than It Looks

  

The government says pensioners and income support recipients are exempt from the 30% floor. Sounds compassionate. Here's why it isn't what it appears.

Australia taxes people individually. Your marginal rate is based on your income alone. But Centrelink benefit eligibility — Age Pension, JobSeeker — is assessed on household income and assets.

This creates a direct contradiction:

Single person, $22k/year income, low assets: qualifies for JobSeeker → EXEMPT from 30% floor

Married person, $22k/year income, partner earns $55k: household income $77k → fails means test → NOT exempt → pays 30% floor

Stay-at-home parent with $0 income, partner working: partner's income breaches threshold → NOT exempt → pays 30% floor

Self-funded retiree with savings above asset threshold: too much saved to qualify for pension → NOT exempt

The government cannot tax people individually and then point to household-assessed welfare programs as the "protection mechanism" for low-income individuals. These operate under completely different legal frameworks. The interaction is structurally inequitable. Similar to the Medicare Levy Surcharge, it creates distortion when family income is split.

A low-income individual in a relationship — which is the majority of low-income adults in Australia — gets zero protection from this policy. They pay 30% minimum CGT on gains, taxed individually, with no access to the exemption that is means-tested on their household.

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Does This Hit Younger Generations Worse?

  

Yes. Measurably.

The 30% floor is most punishing at lower incomes. Young investors earning $35k–$55k currently pay 7.5–15% effective CGT. They'll now pay 30% minimum. That's a 2–4× increase in CGT burden. A high-income earner at 45% sees a ~60% increase. A low-income investor at 15% sees a 300% increase.

Longer compounding horizon = more years under the new regime. A 25-year-old will spend 40+ years accumulating under this system. A 60-year-old has 10–15 years and their existing assets are grandfathered.

Locked out of property, told to invest in shares — and now shares are taxed harder. Gen Z can't afford housing, so they invest in ETFs and equities. This policy targets exactly that wealth-building pathway.

The 30% floor is a regressive flat tax on investment aspiration. It doesn't matter if you earn $35k or $135k — you cannot pay less than 30% on your gains. That is regressive by design, whatever the intention.

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Bottom Line

  

This policy has legitimate goals. Treasury's own data shows 83% of the benefit of the current CGT discount goes to the top 10% of taxpayers by income. That's a real problem worth addressing.

But the implementation is blunt. A 30% minimum floor is not targeted at the wealthy. It is a flat floor that disproportionately increases the tax burden on middle and lower-income investors, often catching people who currently pay zero or minimal CGT. The progressive nature of income tax is being undermined by a flat CGT floor that does not respect income level.

The "pensioner exemption" is narrower than advertised and structurally contradicts Australia's system of individual taxation by relying on household-assessed welfare eligibility.

The long-term consequence: self-funded retirees pay more than those who are using a PPOR shelter and taking the pension, younger Australians have fewer wealth-building tools, and the incentive to keep accessible investment savings weakens in favour of illiquid super and PPOR property — further entrenching the exact housing affordability crisis the policy says it wants to fix.

The question isn't whether CGT reform is needed. It's whether this reform hits the right people, in the right way. On the numbers: it doesn't.

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  Sources:

  

  - Budget 2026-27 Tax Reform: budget.gov.au/content/04-tax-reform.htm

  - ATO Tax Brackets 2026-27: austax.tools/tax-changes-2026-27-australia

  - Federal Budget 2026 Summary: austax.tools/tax-insights/federal-budget-2026-summary

  - CGT Rates by Country 2026: taxsummaries.pwc.com/quick-charts/capital-gains-tax-cgt-rates

  - PM Media Release: pm.gov.au/media/tax-reform-workers-businesses-and-future-generations