The CGT Discount Is Under Threat: What Every Australian Expat Property Investor Needs to Understand

By Jeremy Harper, Director – Atlas Tax

After years of promising no change, the Albanese Government is now openly modelling reforms to Australia’s capital gains tax discount ahead of the May 12 Federal Budget. For Australian expats who own — or plan to own — property in Australia, this is the most significant tax policy moment since the CGT discount itself was introduced in 1999.

In a March 2026 episode of the Expat Mortgage Podcast, James Ridley and I unpacked exactly what’s being proposed, what it means in dollar terms, and — critically — why the picture for non-resident Australian expats is different from what most general coverage suggests.

First: Take a Breath. You Probably Aren’t Immediately Affected.

If you are an Australian expat classified as a non-resident for Australian tax purposes, the first thing to understand is that you already cannot access the 50% CGT discount on property gains accrued since May 2012. That change happened in 2012. The proposed reforms change things for Australian residents — not primarily for you, as a current non-resident.

“If you’re an expat listening to this and you’re a non-tax resident — take a deep breath. This is not going to impact you in the way you might think. Don’t rush out and sell, and don’t be part of that herd mentality.”  — Jeremy Harper, Atlas Mortgages

That said, there are two important ways the proposed changes could affect you. First: if you are planning to return to Australia and sell an investment property after repatriating. Second: if you are still a tax resident of Australia while working abroad (which some expats are, depending on their individual circumstances). Either way — get advice specific to your situation before the budget.

A Brief History: From Indexation to the 50% CGT Discount

To understand why this is happening, it helps to know where the CGT discount came from.

Capital gains tax was introduced in Australia in the late 1980s. The original method for calculating tax relief was indexation: each year, the ATO published an inflation-adjustment factor, and the cost base of your asset was indexed upward, so you only paid tax on real gains above inflation. In theory, this was fair. In practice, it was complex and error-prone.

“Before computers were generally used, accountants would get that calculation wrong all the time. So the government replaced indexation with the 50% discount — if you held the asset for more than 12 months, you just halved the gain. Easy to calculate, everyone understood it.”  — Jeremy Harper, Atlas Mortgages

That simplicity came at a cost: whether you held an asset for 14 months or 14 years, you got the same 50% discount. Someone selling 13 months after purchase got the same concession as someone holding for decades — even though the inflation-adjusted gain over the longer hold was obviously greater. That asymmetry is the political opening that has made the 50% discount controversial.

What CGT Discount Reforms Are Being Proposed?

Treasury is modelling several scenarios. The most credible, based on available reporting, is a reduction in the discount from 50% to approximately 33%, applied to assets held more than 12 months. A return to indexation (the Keating-era model) has also been discussed. A 25% discount — what Bill Shorten took to the 2019 election — is a more aggressive scenario.

Separately, a cap on negative gearing deductions — limiting them to a maximum of two investment properties per person — is also on the table, though government sources suggest this is less likely than a CGT change.

The Senate Select Committee on the CGT Discount tabled its final report in April 2026 recommending the discount be abolished for investment properties, or substantially reduced. The Greens have backed reform. The Coalition has dissented.

What a Lower CGT Discount Means in Dollar Terms?

James and I worked through the numbers on a $400,000 capital gain from a Sydney investment property. Here’s how the three scenarios compare:

These numbers illustrate the impact on a single $400,000 gain with no other income in that year. In practice, most investors have other income, pushing them into higher marginal tax brackets and increasing the impact of a smaller discount.

“If the CGT discount drops to 25%, we could see a lot more investors looking at company structures — because at 30% flat tax on the gross gain, a company might actually be more tax-efficient than an individual under a 25% discount.”  — James Ridley, Atlas Wealth Group

James’s point about company structures is important. If the individual CGT discount drops far enough, holding investment property through a company (taxed at a flat 25-30% on the gain, with no CGT discount but no marginal rate exposure) becomes relatively more attractive. Family trusts with income splitting across beneficiaries are another vehicle investors will likely examine more closely.

The Interaction with Other Tax Changes

The CGT reform doesn’t sit in isolation. The government has already passed Division 296 — the additional tax on superannuation balances over $3 million. The Stage 3 tax cuts that were legislated under the previous government were redesigned by Labor after taking office.

The cumulative effect is a tax environment that is becoming progressively less favourable to passive investment income for higher earners. Jeremy’s view: this is piecemeal reform rather than comprehensive tax restructure. The conversations around bracket creep, GST and individual marginal rates that a genuine tax reform would require remain largely off the table.

Should You Sell Before May 12?

This is the question dominating investor forums right now. The answer, based on the advice James and I gave on air: not unless you were already planning to sell.

“Nothing is legislated. Just hold fire. There were expats who rushed out and sold properties when the main residency changes came through — and many reflected back on that as a mistake. They missed out on substantial gains.”  — Jeremy Harper, Atlas Mortgages

James adds the historical context: the main residence exemption changes were announced in the 2017 budget and not legislated until June 30, 2020 — more than three years later. Proposed legislation takes time.

One alternative to selling that deserves consideration: releasing equity. Raising debt against an investment property doesn’t trigger a CGT event. For investors who want to access value from their portfolio without crystallising a taxable gain, a cash-out refinance is worth exploring. Atlas Mortgages can model this scenario for your specific portfolio.

What Expats Should Do Right Now

Contact Us 

If managing your financial affairs across borders is starting to feel overwhelming, you’re definitely not alone. It’s a complex space, and having the right support can make all the difference. At Atlas Wealth Group, we specialise in supporting Australian expats with cross-border tax planning, superannuation, and wealth management. Contact us to arrange a consultation with a qualified adviser who specialises in Australian expat financial planning to get personalised guidance tailored to your circumstances.

Learn More:

• Upcoming Australian Federal Budget 2026/27 Review in Dubai & Abu Dhabi, click here to view.
• Stay updated on current issues with Atlas Wealth Groups’ podcasts, Atlas Weekly Recap or check out Expat Chat.
• Expat Mortgage podcast: Episode 15 – Budget Uncertainty, CGT Changes & What Expats Should Do Now

Disclaimer: This article is intended for informational purposes only and does not constitute legal or financial advice. Individuals should consult licensed professionals when seeking guidance regarding their financial circumstances.