What is the CGT cliff?
The term "CGT cliff" refers to the abrupt change in capital gains tax treatment that takes effect on 1 July 2027 under the 2026–27 Federal Budget. Before that date, Australian resident individuals who hold an investment property for more than 12 months are entitled to a 50% discount on their capital gain — meaning only half the gain is added to their taxable income.
From 1 July 2027, that discount is abolished for properties purchased after Budget night (7:30 PM AEST, 12 May 2026). In its place, gains are indexed by the Consumer Price Index (CPI) — the same method used in Australia between 1985 and 1999. A minimum 30% effective tax rate applies to the real (inflation-adjusted) gain.
For most investors at the top marginal rate of 47%, this means paying tax on the full real gain at 47% — compared to paying 47% on only half the gain under the current rules. The difference can be tens of thousands of dollars on a typical Sydney or Melbourne investment property.
The three property buckets
Bucket A — Sold before 1 July 2027
Most favourable- 50% CGT discount applies to the entire gain
- Applies to all grandfathered properties sold before the cliff
- No minimum 30% tax rate
- Negative gearing continues as normal
Bucket B — Purchased before cliff, sold after
Transitional — split rules- Gain is split at 1 July 2027 using a valuation or ATO formula
- Pre-cliff portion: 50% discount applies
- Post-cliff portion: CPI indexation + 30% minimum tax
- Negative gearing on existing properties continues
Bucket C — Purchased after Budget night
New rules apply- No 50% CGT discount (unless it's a qualifying new build)
- CPI indexation applies to the entire gain
- 30% minimum tax rate on real gains
- Negative gearing losses quarantined against property income only
Worked example: Sydney investment property
Scenario: Sarah purchased an investment apartment in Surry Hills for $1,085,000 in 2019. The property is now worth $1,480,000. Her cost base (including stamp duty and legal fees) is $1,138,000. She is at the 47% marginal rate.
| Scenario | Gross gain | Taxable gain | CGT payable |
|---|---|---|---|
| Sell before 1 July 2027 | $342,000 | $171,000 (50% discount) | $80,370 |
| Sell after 1 July 2027 (Bucket B) | $342,000 | Split calculation | ~$96,500 |
| Extra tax by waiting | ~$16,130 | ||
Estimate only. Assumes 47% marginal rate, 3.1% CPI p.a., Bucket B split based on holding period. Not financial advice.
What should investors do now?
Know your bucket
Determine whether each property is Bucket A (sell before cliff), B (held across cliff), or C (purchased after Budget night). This determines your tax treatment.
Calculate your exact exposure
Use ClearGain's Scenario Modeller to calculate your before-cliff and after-cliff CGT for each property. The Bucket B split is calculated automatically using the ATO's proportional method.
Build your cost base
Every dollar added to your cost base reduces your capital gain. Stamp duty, legal fees, buyer's agent fees, and capital improvements all count. Use ClearGain's Cost Base Vault to track every item.
Talk to a registered tax agent
The decision to sell before the cliff involves your personal financial situation, income, other assets, and future plans. A registered tax agent or financial adviser can help you make the right call.
Frequently asked questions
Calculate your exact CGT cliff exposure
ClearGain's Scenario Modeller calculates your Bucket B split, before/after cliff comparison, and the exact dollar saving from acting before 1 July 2027.
This page is for general information purposes only and does not constitute financial product advice, tax advice, or legal advice. Tax outcomes depend on individual circumstances. Always seek advice from a registered tax agent or financial adviser before making investment decisions. ClearGain is a calculation and planning tool only. Legislative references: Treasury Laws Amendment (Better Targeted Superannuation and Other Measures) Bill 2026–27; ITAA 1997 s115-100, s114-1.