There is a lot of noise at the moment telling Australian investors to sell before 30 June 2027. The reasoning sounds compelling: the 50% capital gains tax discount ends on 1 July 2027, so realise your gains while you still can.
For most investors, that advice is wrong, and acting on it could cost you a great deal in unnecessary tax.
The reform is real and it is now law. What the headlines have largely skipped is the transitional rule inside the legislation, which preserves the 50% discount on the growth you have already accrued even if you never sell a thing before June. Understanding that rule changes what you should be doing this financial year, and it turns a panicked sell-off into a much narrower and more useful set of decisions.
What actually changed
The 2026-27 Federal Budget announced a fundamental reshaping of capital gains tax, and the legislation received royal assent on 26 June 2026.
From 1 July 2027, for individuals, trusts and partnerships, the 50% CGT discount is replaced by two things working together. Cost base indexation adjusts your cost base for inflation, so you are broadly taxed on the real gain rather than the nominal one. A 30% minimum tax then applies as a floor on the resulting net capital gain.
The changes are broad. They apply across CGT assets generally, not just property. Several important carve-outs remain, including the main residence exemption, the small business CGT concessions and specific treatment for eligible new builds and affordable housing.
Companies are unaffected, as they never had the discount. And critically for anything held in superannuation, complying super funds are excluded from the new regime entirely, which we return to below.
The rule that removes most of the urgency
Here is the part that most commentary has underplayed.
Under the transitional rule, every CGT asset you hold at 30 June 2027 is treated as though you disposed of it just before 1 July 2027 and immediately reacquired it. No tax is payable at that moment. Nothing appears on your return.
What happens instead is that your gain gets split into two pieces at that date. The notional gain accrued up to 1 July 2027 is calculated under the old law, with the 50% discount preserved, and that liability is deferred until you actually sell. Growth after 1 July 2027 is taxed under the new indexation and minimum tax rules.
The practical consequence is simple and worth stating plainly. You cannot lose the discount on growth you have already banked by continuing to hold. The legislation locks it in for you.
That removes the entire basis for a rushed, tax-driven sell-off. Selling an asset in June 2027 that you would otherwise have held for another decade, purely to protect a discount the transitional rule already protects, means paying tax years earlier than necessary and losing the compounding on the money you handed over.
So what is actually worth doing before 30 June 2027?
The deadline has not disappeared. It has just narrowed considerably. Four things genuinely warrant attention.
1. Disposals you were going to make anyway
If a sale was already on the cards in the next year or so, bringing it forward means the whole gain falls under the old rules rather than being split across two regimes. That is a real, if modest, benefit. For a standard sale, the contract date generally controls, not settlement, so a contract signed on or before 30 June 2027 falls under the old rules even if it settles afterwards.
The test is whether you wanted to sell. Not whether the calendar says you should.
2. Anyone whose marginal rate is below 30%
The 30% minimum tax is a floor. It bites hardest on people whose marginal rate sits underneath it, which includes retirees drawing modest income, a lower-earning spouse, and anyone in a year of reduced income.
Under the current rules, a discounted gain in the hands of a low-income earner can be taxed very lightly. On the post-2027 slice, that advantage is capped by the floor. Income support recipients are exempt from the minimum tax, but many low-rate taxpayers are not.
If your household holds appreciated assets in the name of the lower earner precisely because of that rate arbitrage, the arithmetic on the post-2027 portion changes, and the ownership question is worth revisiting before June rather than after.
3. Genuine portfolio drift
This is the one that should have been at the top of your list regardless of any tax reform, and it is covered below.
4. Your record keeping
Because the split is set by the asset’s value at 1 July 2027, that valuation becomes a permanent input into a tax calculation you may not make for another twenty years. For listed shares and ETFs it is a quoted price and easily reconstructed. For property, unlisted investments and anything without a public market, it is not.
Anyone holding assets of that kind should be arranging appropriate evidence of value at that date. There is also an election available to use an apportioning formula instead of a market valuation, which is worth understanding before the date rather than afterwards.
Why portfolio drift still matters more than the tax
Markets have been generous over the past few years, and that generosity creates a quiet problem. A portfolio you set at 60% growth and 40% defensive assets three years ago may now be sitting closer to 72% growth. You did not change anything. The market changed it for you.
If your plan calls for 40% in defensive assets and you are carrying 28%, you are exposed to a materially deeper drawdown than the one you signed up for. Investors discover this at the worst possible moment, which is during a correction, when the temptation to sell is strongest and the damage is permanent.
Tax is a cost. Unmanaged risk is a threat to the plan itself. A good rebalancing decision manages both, but it never lets the tax tail wag the investment dog. That principle has not changed, and if anything the reform makes it more important, because the noise around the deadline is pushing people toward tax-driven decisions that ignore their target asset allocation entirely.
How capital gains tax works when you rebalance
Rebalancing triggers a CGT event only when you dispose of an asset. A few mechanics are worth having straight.
Capital gains tax is not a separate tax. Your net capital gain is added to your assessable income and taxed at your marginal rate, subject to the new minimum tax floor on post-2027 gains. The same $30,000 gain produces a very different bill depending on what else you earned that year.
The 12-month holding requirement still matters. It applied under the discount and it carries across to indexation. Selling at 11 months instead of 13 is still an avoidable error.
Losses are applied before the discount. Capital losses offset gross capital gains first, and the concession applies to what remains. Getting this order wrong when estimating a bill produces an unpleasant surprise.
Losses carry forward indefinitely, but only against capital gains. A capital loss cannot reduce your salary or rental income.
The contract date is what counts, not settlement. For a share sale, the CGT event happens on the trade date. For property, it is the date the contract is signed.
Six ways to rebalance without an unnecessary tax bill
1. Rebalance with new money first
The cheapest rebalance involves no selling at all. Direct new contributions, dividends and distributions toward your underweight asset classes rather than reinvesting them into whatever produced them. Switching off dividend reinvestment on your most appreciated holdings is a small act with a compounding effect.
2. Trim partially rather than exit fully
Rebalancing is not binary. If a holding has grown from 8% to 14% of your portfolio, selling enough to bring it back to 10% may resolve most of the risk while realising less than half the gain of a full exit. The remaining position keeps compounding with the tax deferred.
3. Pair gains with losses in the same year
If you are carrying an underwater holding you no longer want, realising that loss alongside a planned gain reduces the net amount assessed. This is routine and legitimate.
What is not legitimate is a wash sale, where you sell to book the loss and reacquire the same or a substantially identical asset shortly afterwards with no genuine change in your position. The ATO treats those arrangements as tax avoidance. If you crystallise a loss, the change to your holdings needs to be real.
4. Think about which year, for the right reasons
Splitting a large rebalance across two financial years can keep you out of a higher marginal bracket in both, and deferring a disposal into a genuinely lower income year can substantially reduce the tax on the same gain. Those arguments still hold.
What has changed is that the 1 July 2027 boundary should not by itself drive the decision. Your income in each year, your bracket, and whether you actually want to sell are the inputs that matter. The reform affects the composition of a future gain, not whether you should be making an unwanted sale today.
5. Offset a realised gain with a deductible super contribution
Realising a large gain in a year when you can also make a personal deductible super contribution is a natural pairing. The concessional cap for 2026-27 is $32,500, and if your total super balance was under $500,000 at 30 June 2026 you may be able to draw on unused cap amounts from the previous five years under the carry-forward rules.
You must lodge a valid notice of intent to claim with your fund and receive acknowledgement before lodging your return. And the contribution is taxed at 15% inside super, so the benefit is the gap between that and your marginal rate.
6. Check which parcel you are selling
Where a holding has been accumulated over several purchases, the parcels have different cost bases and acquisition dates, and you can generally nominate which parcel is disposed of provided your records support it. Selecting a higher cost base parcel reduces the gain. Many investors leave this to their broker’s default and never look.
Asset location just became more important
This is the most consequential strategic shift in the reform, and it is getting far less attention than the deadline.
Complying superannuation funds, including SMSFs, are excluded from the new regime. The one third CGT discount inside super continues unchanged, the 30% minimum tax does not apply to them, and the transitional deemed sale does not apply inside super either. Pension phase remains untaxed on investment earnings.
Put simply, capital gains inside super are treated more favourably relative to capital gains held personally than they were before the reform. The gap has widened.
Where you hold the same asset class both personally and inside super, doing your selling inside the fund and leaving the personal holding untouched achieves the same allocation change at a materially lower tax cost. And for anyone weighing whether to hold long-term growth assets in their own name or through superannuation, the answer has moved. That question deserves a fresh look rather than a reliance on modelling done under the old rules.
The Division 296 interaction for balances near $3 million
One more layer applies to large super balances.
Division 296 commenced on 1 July 2026 and applies an additional tax to earnings attributable to the portion of an individual’s total superannuation balance above $3 million, with a further tier above $10 million. Both thresholds are indexed.
The design point that matters for rebalancing is that the final legislation taxes realised earnings only. Unrealised capital gains were removed from the calculation. Market movements alone do not create a liability. A decision to sell inside the fund can.
Where fund assets have been held more than 12 months, the usual one third discount applies before the Division 296 calculation runs. And for the first year of operation there is a transitional measurement rule under which the relevant total superannuation balance is taken at 30 June 2027, which gives that single date unusual weight for affected members.
If your balance is near these thresholds, the interaction between fund-level CGT, member-level Division 296 attribution and your personal position is genuinely complex and worth modelling properly. See our article on Division 296 for the detail.
A practical timeline for the rest of FY27
Now through December 2026. Measure your actual allocation against your target and identify every holding more than 5% away from its intended weight. Separately, list any assets that will need a defensible valuation at 1 July 2027.
January to March 2027. Model the disposals you are contemplating under both the old rules and the new ones. Confirm carried forward capital losses. Revisit ownership where a household member sits below the 30% floor. Decide whether a deductible super contribution forms part of the plan.
April to May 2027. Execute whatever you have decided to do, leaving room for settlement and for a notice of intent to be acknowledged.
June 2027. Confirmation and final adjustments only. Arrange valuations where needed. Resist the urge to make a large tax-driven disposal in the last fortnight, which is precisely the environment in which expensive mistakes get made.
Where this fits in your broader plan
Rebalancing sits across investment strategy, tax and superannuation, which is why it is rarely handled well in isolation. The right answer depends on your marginal rate, your horizon, your super balance, whether you hold assets personally or through a trust or an SMSF, and what else is happening in your financial year.
The one thing we would caution against is acting on the general urgency in the market at the moment. If you are being told to sell before June without anyone explaining the transitional rule to you, ask why. Learn more about our financial planning advice or get in touch to talk it through.
Frequently asked questions
Do I need to sell my investments before 30 June 2027 to keep the 50% CGT discount?
Generally no. Under the transitional rule, assets held at 30 June 2027 are treated as disposed of and reacquired just before 1 July 2027. The gain accrued to that date is calculated under the old law with the 50% discount preserved and deferred until you actually sell. You do not lose the discount on growth already accrued by continuing to hold. Selling early to protect it usually means paying tax years sooner than necessary.
What replaces the 50% CGT discount from 1 July 2027?
For individuals, trusts and partnerships, cost base indexation applies to assets held more than 12 months, adjusting the cost base for inflation so you are broadly taxed on the real gain. A 30% minimum tax then applies as a floor on the resulting net capital gain. Various carve-outs remain, including the main residence exemption and the small business CGT concessions.
Does the CGT reform apply inside superannuation?
No. Complying super funds, including SMSFs, are excluded from the new regime. The one third CGT discount continues, the 30% minimum tax does not apply, and there is no deemed sale inside the fund. Pension phase earnings remain untaxed. This makes asset location a more significant decision than it was previously.
Who is worse off under the new rules?
The 30% minimum tax is a floor, so it has the greatest effect on taxpayers whose marginal rate sits below 30%, including retirees on modest incomes and lower-earning spouses. Income support recipients are exempt from the minimum tax. High-growth assets held for a long period after 1 July 2027 are also more affected, because indexation offers limited relief where growth substantially exceeds inflation.
Does rebalancing always trigger capital gains tax?
No. Rebalancing only triggers a CGT event when you dispose of an asset. If you can restore your target allocation using new contributions, dividends or distributions, no CGT event occurs. Rebalancing inside a superannuation fund is also treated differently, because the tax is assessed against the fund rather than against you personally.
Can I use capital losses from previous years to offset this year’s gains?
Yes. Capital losses carry forward indefinitely until you have a capital gain to apply them against, and they cannot reduce ordinary income such as salary. Losses are applied against gross capital gains before any concession is calculated, so the order of operations affects your result.
What records should I keep for 1 July 2027?
Because the split between the two regimes is set by the asset’s value at that date, you need defensible evidence of what each asset was worth. Listed shares and ETFs can be reconstructed from quoted prices. Property, unlisted holdings and private assets cannot, so arrange appropriate valuations. An election to use an apportioning formula instead of a market valuation is also available and worth understanding in advance.
General advice warning. This article contains general information only and does not take into account your objectives, financial situation or needs. It is not tax advice. Tax law is complex and the changes described here involve transitional rules that apply differently depending on your circumstances. You should consider whether the information is appropriate for you and seek personal financial and taxation advice before acting on any of it.
