Federal Budget 2026-27 Capital Gains Tax Reform: What Construction Business Owners Need To Know

From 1 July 2027, the way capital gains are taxed in Australia is changing significantly. The 50 per cent discount that investors and business owners have relied on since 1999 is being replaced by a different system. If you have land holdings, an investment property, or a business you plan to sell in the next few years, this change directly affects the after-tax outcome. 

This article explains what is changing, what it means in practical terms, and what decisions are worth thinking through before the window closes on 30 June 2027. 

What the measure does

When you sell an asset, the difference between what you paid and what you sold it for is your capital gain. Under the current system, if you have owned the asset for more than 12 months, you only pay tax on half of that gain. This is the 50 per cent CGT discount. 

From 1 July 2027, the 50 per cent discount is gone. Instead, two things happen: 

• The original purchase price of your asset is adjusted for inflation (using the Consumer Price Index). This means you are only taxed on the real gain, not the portion that simply reflects rising prices over time. 

• A minimum 30 per cent tax then applies to the gain. 

Whether you end up better or worse off under the new system depends on how long you have held the asset and what inflation has done during that time. An asset bought 20 years ago through a period of high inflation may see a large chunk of the gain wiped out by the inflation adjustment, making the new system comparable to the old one. An asset bought five years ago in a lower-inflation period will see very little wiped out, and the loss of the 50 per cent discount becomes the dominant factor. 

A simple example

You bought vacant land in 2020 for $1.5 million and sell it in 2028 for $2.5 million. The nominal gain is $1 million. 

Under the current system, you pay tax on half that gain ($500,000) at your marginal rate. For a high-income earner, the effective tax rate on the full $1 million gain works out to roughly 23.5 per cent. 

Under the new system, the inflation adjustment might bring the effective cost base up to around $1.85 million, leaving a taxable gain of $650,000. Applying the 30 per cent minimum tax gives a tax bill of roughly $195,000, or about 19.5 per cent of the nominal gain. 

In this example, the new system is slightly better. However, change the numbers, shorten the holding period, or assume lower inflation, and the old system wins. This is why the modelling needs to be done for your specific assets, not at the headline level. 

What stays in place

Several important rules are preserved: 

• The 50 per cent discount still applies to gains up to 30 June 2027. If you sell before that date, nothing changes. The new rules only apply to sales from 1 July 2027 onward. 

• Investors in new residential property can choose which system applies. This is the Government pairing the CGT change with the negative gearing carve-out for new builds. If you invest in new residential construction, you are not locked into the new rules. 

• The small business CGT concessions are untouched. If your operating business qualifies for the 15-year exemption, the retirement exemption, or the other small business concessions, those continue to apply. For most construction business owners, a future business sale will still be structured around these concessions, and the new CGT regime has limited effect on that outcome. 

• Your family home is not affected. The main residence exemption continues to apply. 

• Pre-1985 assets are protected up to 30 June 2027. If you or your family hold assets acquired before 20 September 1985, those assets remain CGT-free for gains realised before 1 July 2027. After that date, gains from pre-1985 assets enter the new system, but with indexation applied from the start. 

Why this matters for construction business owners

Development sites

Any site you are holding with a plan to sell will face a real timing question. A sale settled before 30 June 2027 attracts the current 50 per cent discount. A sale after that attracts the new system. For sites with a large unrealised gain (or profit you haven’t banked yet) built up over several years, this is worth modelling carefully. 

investment property

The CGT change sits alongside the negative gearing changes coming from the same Budget. If you hold established residential investment property, both measures affect you. New builds are better insulated, because investors in new builds can choose between the old and new CGT rules. Established property investors cannot. 

Your operating business

For most construction business owners, a future business sale will be structured around the small business CGT concessions, which are not changing. If your business qualifies, the new CGT system may have limited practical effect on the sale outcome. But if your gain exceeds the concession thresholds, the interaction between the concessions and the new 30 per cent minimum tax needs to be worked through specifically. 

The planning window

The 14 months between now and 30 June 2027 are the only window in which you can still sell a CGT asset under the current, more favourable rules. That makes this period a genuine planning opportunity for clients who were already thinking about a sale. 

The discipline here is to separate the tax case from the commercial case. If you have a buyer, a real price, and a sale that was going to happen in the next two or three years anyway, bringing it forward to capture the 50 per cent discount may make sense. If you are considering a sale purely to beat the deadline, without a real buyer or the right price, the cost of selling before the asset is ready will almost always exceed the tax saving. 

For long-held assets through high-inflation periods, the indexation benefit under the new system may be large enough that the new rules are not significantly worse than the old ones. The modelling is asset-specific and worth doing properly before making any decisions. 

The decisions to start working through

Three decisions to take into the next conversation with your accountant. 

ONE: identify the assets where timing is actually a decision

Not every asset needs a decision made now. Run through your land holdings, investment properties and other CGT assets, and identify the ones where either a sale is already in view, or the unrealised gain is large enough that the difference between the two systems is material. 

TWO: model the after-tax outcome under each regime for those assets

For the assets that matter, the comparison needs to estimate the inflation-adjusted cost base, apply the 30 per cent minimum tax to the resulting gain, and compare it to what you would pay under the current 50 per cent discount. That comparison tells you whether bringing a sale forward is actually worth it. 

THREE: check your small business CGT concession position if a business sale is on the horizon 

If you are thinking about selling the business in the next two to three years, the interaction between the new CGT rules and the small business concessions is the planning conversation that matters most. The concessions are preserved, but how they interact with the new minimum tax for gains above the concession thresholds needs to be worked through for your specific situation. 

What is not changing

The 50 per cent discount is not being removed retroactively. Sales before 1 July 2027 are unaffected. The small business CGT concessions are not changing. The main residence exemption is not changing. Pre-1985 asset status is preserved for sales before 1 July 2027. 

What is changing is the after-tax return on long-held investment assets sold from 1 July 2027 onward. For some assets the difference will be modest. For others it will be significant. The work is in understanding which category each of your assets sits in. 

What to do now

Start with a CGT asset review with your accountant. That means looking at the unrealised gain on each significant asset in your structure, the holding period, whether a sale in the next 14 months is commercially supportable, and the small business concession position on the operating business. 

That review should sit alongside the trust and negative gearing reviews if your assets are held in a discretionary trust or include residential investment property, because all three Budget measures can interact through the same family group of assets. 

Questions about how the 2026-27 Federal Budgets may impact your construction business?

We are working through the detail with our construction clients now. The planning window closes on 30 June 2027. If you would like to talk through what the CGT changes mean for your structure, get in touch. 

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This article is part of our 2026-27 Federal Budget series for construction business owners. See also our master article on the Budget, and our deep-dives on the discretionary trust changes and negative gearing changes.