Will Capital Gains Tax Changes Affect Your Investment Property Profits?

The Australian government is currently reviewing proposed changes to Capital Gains Tax (CGT) that could affect profits from investment property.

If you own a property in Rockhampton, Yeppoon or anywhere else for that matter, the outcome could have significant financial implications, especially if an investment property is part of your retirement plan.

At the centre of the discussion is the capital gains tax discount, a concession that has been part of Australia’s tax system for more than two decades.

What is the capital gains tax concession?

Under rules introduced in 1999, individuals who hold an asset for more than 12 months are eligible for a 50 per cent capital gains tax discount. This means only half of the capital gain is added to a person’s taxable income when the asset is sold.

For example, if an investor sells a property and makes a $100,000 capital gain, only $50,000 is added to their taxable income for that financial year.

Because capital gains are taxed as part of normal income, the discount can reduce the tax payable on the proceeds of a property sale. Someone earning more than $135,000 a year can remain in the 37 per cent marginal tax bracket, rather than moving into the 45 per cent top tax rate for incomes above $190,000.

The discount replaced an earlier system that indexed capital gains for inflation, which had been used when the capital gains tax was first introduced in Australia in 1985.

Why the review?

The CGT discount is currently under scrutiny as part of broader discussions about housing affordability and the tax system.

In November 2025, the Australian Senate established a Select Committee on the Operation of the Capital Gains Tax Discount to examine how the concession affects housing, investment patterns and inequality.

The federal government has also not ruled out changes ahead of future federal budgets, with reports suggesting tax reform discussions could include adjustments to the CGT discount.

What changes are being proposed?

While no final decision has been announced at the time of publishing this article, several reform models have been discussed.

One commonly proposed option is reducing the CGT discount from 50 per cent to 25 per cent.

If this occurs, a larger portion of any capital gain will be included in a person’s taxable income.

Using the same example:

• Under the current system, a $100,000 gain results in $50,000 being taxed.
• Under a 25 per cent discount, $75,000 would be taxed instead.
   

Other proposals that have been discussed include reducing the discount to around 33 per cent, returning to an inflation-indexation system, or replacing the discount entirely with a different capital gains tax model.

At this stage, no changes have been legislated.

What CGT changes could mean for the property market

If the CGT discount is reduced, investment property owners could face higher tax liabilities when they sell.

Changes to tax incentives also influence how you approach the market as an investor, and may mean you decide to sell sooner rather than later.

Depending on the outcome of proposed CGT reform, the property market may have a rush of investment property sales as owners look to maximise their financial gains by selling before new rules come into play.

Planning ahead

With potential changes still under discussion, it may be worth reviewing your investment strategy now.

Understanding how possible CGT reforms could affect your long-term plans, including retirement or aged care costs, can help you make informed decisions about your property portfolio.

Your accountant and financial adviser are good points of contact to explain the potential outcomes of different CGT-related scenarios.

Another expert to have on your side is your local real estate agent, who can help you take action quickly if you need to.

If you’re in Rockhampton, Yeppoon or the wider Capricorn Coast and want to break down the numbers and explore your options, reach out to our team today.