Budget 2026–27 CGT: The New Build Tax Choice - 50% Discount or Indexation?
22 Jul 2026
8 minutes
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Capital gains tax on an investment property now depends on two things: whether you bought it before or after the Budget date - 12 May 2026 - and whether it's a new build or an existing home.
Every investment property fits into exactly one of three buckets. Each bucket gives you a choice between Option 1 and Option 2.
| Bucket | When you bought it | Option 1 | Option 2 |
|---|---|---|---|
| A - Bought before the Budget | On or before 12 May 2026 | With a certified valuation: 50% discount on gains up to 30 June 2027. Gains after that date use indexation instead. | Without a certified valuation: the ATO splits the gain by time instead, using its own default method. |
| B - New build, bought after the Budget | After 12 May 2026, brand-new home, never lived in before | 50% discount on the whole gain. | Indexation of your costs instead. |
| C - Existing home, bought after the Budget | After 12 May 2026, second-hand home | Indexation of your costs - the only method available. | Not applicable - there's no second option for this bucket. |
This guide focuses on Bucket B - new builds bought after the Budget.
Buy a brand-new home after 12 May 2026, and you keep a choice that most other post-Budget buyers lose: work out the gain both ways, 50% discount or full indexation, and use whichever gives the better result. There's no default here. You have to calculate both to know which one wins.
| Qualifies as a new build | Doesn't qualify |
|---|---|
| A newly built apartment bought off-the-plan | An existing house or apartment bought second-hand |
| A duplex replacing one house with two (adds to supply) | A knock-down rebuild replacing one house with one house |
| Any new home built on vacant land | A granny flat added next to an existing property |
| A newly built property occupied for less than 12 months before first sale | A new build lived in for more than 12 months before you buy it |
A renovated older home doesn't qualify - no matter how extensive the renovation. That's Bucket C instead.
A quick refresher: indexation grows your cost base with inflation instead of applying a flat 50% discount to the raw gain. Which one wins depends on the numbers below - not a rule of thumb.
Same choice, run over two different holding periods. Watch which method wins each time.
| 10-Year Hold | 25-Year Hold | |
|---|---|---|
| Bought (new build) | 2027 - $500,000 | 2027 - $400,000 |
| Sold | 2037 - $900,000 | 2052 - $1,100,000 |
| Raw gain | $400,000 | $700,000 |
| Tax rate used | 47% (top marginal rate) | 47% (top marginal rate) |
| CPI assumed | 3% p.a. (34% cumulative) | 3% p.a. (109% cumulative) |
| 10-Year Hold | 25-Year Hold | |||
|---|---|---|---|---|
| Discount | Indexation | Discount | Indexation | |
| Cost base after indexing | n/a | $672,000 | n/a | $837,500 |
| Taxable gain | $200,000 | $228,000 | $350,000 | $262,500 |
| Tax owed at 47% | $94,000 | $107,200 | $164,500 | $123,400 |
| Better result? | Yes - $13,200 less tax | No | No | Yes - $41,100 less tax |
Over 10 years, the discount wins by $13,200. Stretch the same property type to a 25-year hold, and indexation wins instead - by a much larger $41,100, because the same inflation rate compounds for so much longer. Nothing about the rule changed between the two columns; only the holding period did. That's why you need to run both numbers every time. Assuming last time's winner will win again is how the wrong method gets used.
| DO | DON'T |
|---|---|
| ✓ Confirm the property genuinely qualifies as a new build - check the occupation history and first-sale date - before assuming you have this choice. | ✗ Assume the 50% discount is always the better choice. It isn't, and won't always be. |
| ✓ Work out both methods before you lodge. Don't guess which one wins. | ✗ Use one indexation number for costs spent at different times - each one needs its own. |
| ✓ Recalculate at the time of sale, not at purchase - the winner depends on inflation and price growth that actually happened. | ✗ Confuse this bucket with Bucket C - existing homes bought after 12 May 2026 don't get this choice. |
| ✓ Keep every cost dated - indexation applies per item, not to the total. | ✗ Leave the comparison until tax time - it affects how you should be keeping records from day one. |
| ✓ Keep a record of every capital cost. Without it, you don't just lose that cost from your base - you also lose the inflation uplift it would have earned. At 47%, that's tax on the cost and its indexed growth, both gone. | ✗ Assume a rough estimate of a capital cost is good enough - indexation needs the actual invoice amount and date, not a guess. |
Getting this right is genuinely risky on the old spreadsheet model - it's simply not built for this.
Get it wrong, and the result is the same either way: you pay more tax than you needed to, even though the lower-tax option was legally available to you the whole time.
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Book a Demo - with FounderIt has to be a genuinely new home, such as an off-the-plan apartment, a duplex that adds to supply, or a home built on vacant land, occupied for less than 12 months before its first sale. A knock-down rebuild, a granny flat, or an existing home you buy second-hand doesn't qualify, and neither does a renovated older home, no matter how extensive the renovation.
