...and the growth strategy just died... thanks gvnmnt
The big change is that Australia is effectively abolishing the current 50% capital gains tax (CGT) discount for most investors from 1 July 2027 and replacing it with inflation indexation plus a new 30% minimum tax on real capital gains. This applies broadly to shares, ETFs and other CGT assets held by individuals, trusts and partnerships. Right now, if you hold shares or ETFs for more than 12 months, you usually get a 50% CGT discount. Under the new system, instead of halving the gain, your cost base will be indexed for inflation and then the “real” gain will be taxed, with a minimum effective tax rate of 30% applying to those gains. The reforms are specifically described as applying to “all CGT assets”, which includes shares and ETFs. Existing holdings get transitional protection: only gains accruing after 1 July 2027 move to the new rules, while gains built up before that date can still use the old 50% CGT discount. Even pre-1985 assets lose their blanket exemption for future gains after that date, although gains accrued before 1 July 2027 stay exempt. For most ordinary share and ETF investors, this means long-term investing remains tax-advantaged because inflation gets stripped out, but the tax break becomes materially smaller than the current 50% discount, especially during low-inflation periods. The budget papers say the goal is to reduce tax advantages that mainly benefit higher-income investors and retirees timing asset sales in low-income years. The 30% minimum tax is aimed at stopping people from paying very low effective tax rates on large realised gains. On negative gearing, the changes are mostly about residential property, not shares or ETFs. Shares and ETFs keep current deductibility rules. The papers explicitly state that “other asset classes, such as shares, will remain subject to existing arrangements.” The new negative gearing restrictions only target established residential property purchased after Budget night on 12 May 2026, with deductions quarantined from 1 July 2027. Overall, for investors in Australian or global ETFs and shares, the main impact is the replacement of the 50% CGT discount with indexed cost bases and the new minimum tax regime from July 2027.