Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (49 of 2026)

Schedule 1   CGT adjustments

Part 1   Main amendments

Income Tax Assessment Act 1997

13   At the end of Division 112

Add:

Subdivision 112-E - Deemed sales just before, and reacquisitions on, 1 July 2027

Table of sections

112-155 Australian resident individuals - deemed sale just before, and reacquisition on, 1 July 2027

112-160 Australian resident individuals - defer a gain or loss from the deemed sale until the later realisation event happens

112-165 Trusts - deemed sale just before, and reacquisition on, 1 July 2027

112-170 Trusts - defer a gain or loss from the deemed sale until the later realisation event happens

112-175 Pre-CGT assets - deemed sale just before, and reacquisition on, 1 July 2027

112-180 Pre-CGT assets - defer a gain from CGT event K6 from the deemed sale until the later realisation event happens

112-185 Method for apportioning capital gains and losses between realisation events and earlier deemed CGT events

112-155 Australian resident individuals - deemed sale just before, and reacquisition on, 1 July 2027

Application

(1) This section applies in relation to a *CGT asset of yours if:

(a) on 30 June 2027, the asset is not a *pre-CGT asset; and

(b) you are an individual who *acquired the asset and then held it throughout the period:

(i) starting at a time before 1 July 2027; and

(ii) ending at the end of 30 June 2027; and

(c) you continue to hold the asset until a *realisation event happens in relation to the asset on or after 1 July 2027; and

(d) if it were assumed that you make a *discount capital gain from the realisation event - section 115-105 (about foreign or temporary residents) would not apply to the discount capital gain; and

(e) the asset is not an asset for which either of the following sections applies in relation to a *capital gain you make in relation to the realisation event:

(i) section 115-102 (about new residential dwellings);

(ii) section 115-125 (about affordable housing).

Deemed sale and reacquisition

(2) For the purposes of this Part, Part 3-3 and Subdivision 960-M, you are taken:

(a) to have sold the asset just before 1 July 2027, with your *capital proceeds for that sale taken to be the amount applying under subsection (3); and

(b) to have *acquired the asset again just after that sale for an amount equal to those capital proceeds.

Note 1: The sale under paragraph (a) happens on 30 June 2027, and the reacquisition under paragraph (b) happens on 1 July 2027.

Note 2: Any capital gain or loss you make from the sale on 30 June 2027 is disregarded (and deferred) until the income year in which the realisation event happens. You can wait until then before working out the amount of the capital gain or loss (see section 112-160).

Note 3: Subdivision 960-M deals with indexation of a CGT asset's cost base.

(3) The *capital proceeds are taken to be equal to:

(a) unless paragraph (b) applies - the asset's *market value just before 1 July 2027; or

(b) if you choose to use an apportioning method determined under section 112-185 - the amount of capital proceeds worked out using that method.

(4) For the purposes of paragraph 103-25(1)(a), the *realisation event is the relevant *CGT event for such a choice.

Note 1: Section 103-25 sets out rules for making choices.

Note 2: This subsection and section 103-25 mean you do not have to make a choice until the day you lodge your income tax return for the income year in which the realisation event happens (see paragraph 103-25(1)(a)).

Note 3: The realisation event is the event mentioned in paragraph (1)(c).

(5) Except for the purposes of section 112-185 (about making apportioning determinations), none of the following apply in relation to a sale and acquisition mentioned in paragraphs (2)(a) and (b) for which a choice is made under paragraph (3)(b):

(a) Subdivisions 112-A, 112-B, 112-C and 112-D (about modifications of the cost base and reduced cost base);

(b) sections 116-25 to 116-60 (about modifications of the general rules about capital proceeds).

112-160 Australian resident individuals - defer a gain or loss from the deemed sale until the later realisation event happens

Application

(1) This section applies in relation to a *CGT asset of yours if, under paragraph 112-155(2)(a), you make:

(a) a *capital gain (the initial notional gain ); or

(b) a *capital loss (the initial notional loss );

in respect of the asset (disregarding subsection (2) of this section).

Note: The initial notional gain or loss is made from the sale that is taken to happen at the end of 30 June 2027 (see paragraph 112-155(2)(a)), and is disregarded under subsection (2) of this section.

Disregard the initial notional gain or loss because it is to be deferred

(2) Disregard the initial notional gain or the initial notional loss, except for the purposes of subsection (3) or (4).

Deferring an initial notional gain

(3) If you made an initial notional gain, then for the purposes of Division 102:

(a) in the income year in which the *realisation event happens in relation to the *CGT asset - you are treated as having made a *capital gain ( your deferred gain ):

(i) for the *CGT event that happens under paragraph 112-155(2)(a) (the deemed CGT event ); and

(ii) that is a *discount capital gain if the initial notional gain is a discount capital gain; and

(iii) that is equal to the amount of the initial notional gain; and

(b) disregard section 102-20 in relation to your deferred gain; and

(c) for the purposes of subparagraph (a)(ii) of this subsection, in working out whether the initial notional gain is a discount capital gain, treat the deemed CGT event as if it happens on the day the realisation event happens; and

(d) in working out whether, under step 6 of the method statement in subsection 102-5(1), your deferred gain qualifies for any of the small business concessions, treat the deemed CGT event as if it happens on the day the realisation event happens.

Note 1: For paragraph (a), the realisation event is the CGT event referred to in paragraph 112-155(1)(c).

Note 2: Paragraph (c) is relevant for working out whether the 12-month rule in subsection 115-25(1) is satisfied for the initial notional gain.

Note 3: If the initial notional gain is a discount capital gain, then under step 5 of the method statement in subsection 102-5(1), the 50% discount mentioned in paragraph 115-100(aa) can apply to your deferred gain.

Deferring an initial notional loss

(4) If you made an initial notional loss, then for the purposes of Division 102:

(a) in the income year in which the *realisation event happens in relation to the *CGT asset - you are treated as having made a *capital loss ( your deferred loss ) equal to the amount of the initial notional loss; and

(b) disregard section 102-20 in relation to your deferred loss.

Note: You may make a separate capital loss from the realisation event for the period starting on 1 July 2027. In working out whether you make a capital loss from the realisation event for this period, you are taken to have acquired the CGT asset at the time, and for the amount, mentioned in paragraph 112-155(2)(b).

Working out whether concessions are available for a capital gain from the realisation event

(5) In working out when you *acquired the *CGT asset for the purposes of working out whether your *capital gain resulting from the *realisation event is a *discount capital gain, disregard the sale and acquisition under subsection 112-155(2).

Note: If you make a capital gain from the realisation event in respect of the asset, this subsection is relevant for working out whether the 12-month rule in subsection 115-25(1) is satisfied for the capital gain.

(6) In working out whether, under step 6 of the method statement in subsection 102-5(1), your *capital gain resulting from the *realisation event qualifies for any of the small business concessions, disregard the sale and acquisition under subsection 112-155(2).

Note: Subsections (5) and (6) refer to the capital gain from the realisation event for the period starting on 1 July 2027. The sale and reacquisition under subsection 112-155(2) remain relevant for working out the amount of this capital gain, just not for whether this capital gain:

(a) is a discount capital gain; or

(b) qualifies for any of the small business concessions.

112-165 Trusts - deemed sale just before, and reacquisition on, 1 July 2027

Application

(1) This section applies in relation to a *CGT asset of a trust estate if:

(a) on 30 June 2027, the asset is not a *pre-CGT asset; and

(b) the trustee *acquired the asset and then held it throughout the period:

(i) starting at a time before 1 July 2027; and

(ii) ending at the end of 30 June 2027; and

(c) the trustee continues to hold the asset until a *realisation event happens in relation to the asset on or after 1 July 2027; and

(d) if it were assumed that the trust estate makes a *discount capital gain (the primary trust gain ) from the realisation event - at least one beneficiary of the trust makes, because of section 115-215, a discount capital gain in relation to the primary trust gain for which:

(i) for a beneficiary who is an individual - section 115-110 (about foreign or temporary residents) does not apply; or

(ii) for a beneficiary that is another trust (other than a *complying superannuation entity) - section 115-120 (about foreign or temporary residents) does not apply; and

(e) the asset is not an asset for which either:

(i) section 115-102 (about new residential dwellings); or

(ii) section 115-125 (about affordable housing);

applies in relation to all of the *capital gains that, because of section 115-215, are made by the beneficiaries of the trust in relation to the capital gain the trust estate makes in relation to the realisation event.

Deemed sale and reacquisition

(2) For the purposes of this Part, Part 3-3 and Subdivision 960-M, the trustee is taken:

(a) to have sold the asset just before 1 July 2027, with the trustee's *capital proceeds for that sale taken to be the amount applying under subsection (3); and

(b) to have *acquired the asset again just after that sale for an amount equal to those capital proceeds.

Note 1: The sale under paragraph (a) happens on 30 June 2027, and the reacquisition under paragraph (b) happens on 1 July 2027.

Note 2: Any capital gain or loss the trust estate makes from the sale on 30 June 2027 is disregarded (and deferred) until the income year in which the realisation event happens. The trustee (and beneficiaries) can wait until then before working out the amount of the capital gain or loss (see section 112-170).

Note 3: Subdivision 960-M deals with indexation of a CGT asset's cost base.

(3) The *capital proceeds are taken to be equal to:

(a) unless paragraph (b) applies - the asset's *market value just before 1 July 2027; or

(b) if the trustee chooses to use an apportioning method determined under section 112-185 - the amount of capital proceeds worked out using that method.

(4) For the purposes of paragraph 103-25(1)(a), the *realisation event is the relevant *CGT event for such a choice.

Note 1: Section 103-25 sets out rules for making choices.

Note 2: This subsection and section 103-25 mean the trustee does not have to make a choice until the day the trustee lodges the trust's income tax return for the income year in which the realisation event happens (see paragraph 103-25(1)(a)).

Note 3: The realisation event is the event mentioned in paragraph (1)(c).

(5) Except for the purposes of section 112-185 (about making apportioning determinations), none of the following apply in relation to a sale and acquisition mentioned in paragraphs (2)(a) and (b) for which a choice is made under paragraph (3)(b):

(a) Subdivisions 112-A, 112-B, 112-C and 112-D (about modifications of the cost base and reduced cost base);

(b) sections 116-25 to 116-60 (about modifications of the general rules about capital proceeds).

(6) To avoid doubt, subsection (2) applies only for the purposes of the provisions mentioned in that subsection. For example, it does not apply for the purposes of Subdivision EA of Division 7A of Part III of the Income Tax Assessment Act 1936 (about unpaid present entitlements).

112-170 Trusts - defer a gain or loss from the deemed sale until the later realisation event happens

Application

(1) This section applies in relation to a *CGT asset of a trust estate if, under paragraph 112-165(2)(a), the trust estate makes:

(a) a *capital gain (the initial notional gain ); or

(b) a *capital loss (the initial notional loss );

in respect of the asset (disregarding subsection (2) of this section).

Note: The initial notional gain or loss is made from the sale that is taken to happen at the end of 30 June 2027 (see paragraph 112-165(2)(a)), and is disregarded under subsection (2) of this section.

Disregard the initial notional gain or loss because it is to be deferred

(2) Disregard the initial notional gain or the initial notional loss, except for the purposes of subsection (3) or (4).

Deferring an initial notional gain

(3) If the trust estate made an initial notional gain, then for the purposes of Division 102 and Subdivision 115-C:

(a) in the income year in which the *realisation event happens in relation to the *CGT asset - treat the trust estate as having made a *capital gain (the trust's deferred gain ):

(i) for the *CGT event that happens under paragraph 112-165(2)(a) (the deemed CGT event ); and

(ii) that is a *discount capital gain if the initial notional gain is a discount capital gain; and

(iii) that is equal to the amount of the initial notional gain; and

(b) disregard section 102-20 in relation to the trust's deferred gain; and

(c) for the purposes of subparagraph (a)(ii) of this subsection, in working out whether the initial notional gain is a discount capital gain, treat the deemed CGT event as if it happens on the day the realisation event happens; and

(d) in working out whether, under step 6 of the method statement in subsection 102-5(1), the trust's deferred gain qualifies for any of the small business concessions, treat the deemed CGT event as if it happens on the day the realisation event happens.

Note 1: For paragraph (a), the realisation event is the CGT event referred to in paragraph 112-165(1)(c).

Note 2: Paragraph (c) is relevant for working out whether the 12-month rule in subsection 115-25(1) is satisfied for the initial notional gain.

Note 3: If the initial notional gain is a discount capital gain, then under step 5 of the method statement in subsection 102-5(1), the 50% discount mentioned in paragraph 115-100(ab) can apply to the trust's deferred gain.

Note 4: A beneficiary of the trust may also be taken to have made, because of section 115-215, a capital gain in relation to the trust's deferred gain.

Deferring an initial notional loss

(4) If the trust estate made an initial notional loss, then for the purposes of Division 102:

(a) in the income year in which the *realisation event happens in relation to the *CGT asset - treat the trust estate as having made a *capital loss (the trust's deferred loss ) equal to the amount of the initial notional loss; and

(b) disregard section 102-20 in relation to the trust's deferred loss.

Note 1: For paragraph (a), the realisation event is the CGT event referred to in paragraph 112-165(1)(c).

Note 2: The trust estate may make a separate capital loss from the realisation event for the period starting on 1 July 2027. In working out whether the trust estate makes a capital loss from the realisation event for this period, the trust estate is taken to have acquired the CGT asset at the time, and for the amount, mentioned in paragraph 112-165(2)(b).

Note 3: The trust's deferred loss, and any separate capital loss referred to in note 2, are taken into account to work out whether the trust estate has a net capital gain for the income year in which the realisation event happens. If the trust estate does, then a beneficiary of the trust may also be taken to have, because of section 115-215, an extra capital gain for that income year.

Working out whether concessions are available for a capital gain from the realisation event

(5) In working out when the trustee *acquired the *CGT asset for the purposes of working out whether the trust estate's *capital gain resulting from the *realisation event is a *discount capital gain, disregard the sale and acquisition under subsection 112-165(2).

Note: If the trust estate make a capital gain from the realisation event in respect of the asset, this subsection is relevant for working out whether the 12-month rule in subsection 115-25(1) is satisfied for the capital gain.

(6) In working out whether, under step 6 of the method statement in subsection 102-5(1), the trust estate's *capital gain resulting from the *realisation event qualifies for any of the small business concessions, disregard the sale and acquisition under subsection 112-165(2).

Note 1: Subsections (5) and (6) refer to the capital gain from the realisation event for the period starting on 1 July 2027. The sale and reacquisition under subsection 112-165(2) remain relevant for working out the amount of this capital gain, just not for whether this capital gain:

(a) is a discount capital gain; or

(b) qualifies for any of the small business concessions.

Note 2: A beneficiary of the trust may also be taken to have made, because of section 115-215, a capital gain in relation to the capital gain of the trust estate referred to in subsections (5) and (6).

112-175 Pre-CGT assets - deemed sale just before, and reacquisition on, 1 July 2027

(1) This section applies in relation to your asset if:

(a) the asset is a *pre-CGT asset on 30 June 2027; and

(b) you continue to hold the asset until a *realisation event happens in relation to the asset on or after 1 July 2027.

Deemed sale and reacquisition

(2) For the purposes of this Part, Part 3-3 and Subdivision 960-M, you are taken:

(a) to have sold the asset just before 1 July 2027, with your *capital proceeds for that sale taken to be the amount applying under subsection (3); and

(b) to have *acquired the asset again just after that sale for an amount equal to those capital proceeds.

Note 1: This subsection causes the asset to cease to be a pre-CGT asset, and for the first element of the asset's cost base to be reset, on 1 July 2027 (see paragraph 149-10(a) and subsection 110-25(2)).

Note 2: The sale under paragraph (a) happens on 30 June 2027, and the reacquisition under paragraph (b) happens on 1 July 2027.

Note 3: Any capital gain or capital loss you make from the sale on 30 June 2027 is disregarded (see subsection 104-10(5)).

Note 4: For the purposes of working out whether you make a capital gain or capital loss from the realisation event, you are taken to have acquired the CGT asset at the time, and for the amount, applying under paragraph (b).

Note 5: Subdivision 960-M deals with indexation of a CGT asset's cost base.

(3) The *capital proceeds are taken to be equal to:

(a) unless paragraph (b) applies - the asset's *market value immediately before 1 July 2027; or

(b) if you choose to use an apportioning method determined under section 112-185 - the amount of capital proceeds worked out using that method.

(4) For the purposes of paragraph 103-25(1)(a), the *realisation event is the relevant *CGT event for such a choice.

Note 1: Section 103-25 sets out rules for making choices.

Note 2: This subsection and section 103-25 mean you do not have to make a choice until the day you lodge your income tax return for the income year in which the realisation event happens (see paragraph 103-25(1)(a)).

(5) Except for the purposes of section 112-185 (about making apportioning determinations), none of the following apply in relation to a sale and acquisition mentioned in paragraphs (2)(a) and (b) for which a choice is made under paragraph (3)(b):

(a) Subdivisions 112-A, 112-B, 112-C and 112-D (about modifications of the cost base and reduced cost base);

(b) sections 116-25 to 116-60 (about modifications of the general rules about capital proceeds).

(6) To avoid doubt, subsection (2) applies only for the purposes of the provisions mentioned in that subsection. For example, it does not apply for the purposes of Subdivision EA of Division 7A of Part III of the Income Tax Assessment Act 1936 (about unpaid present entitlements).

112-180 Pre-CGT assets - defer a gain from CGT event K6 from the deemed sale until the later realisation event happens

Application

(1) This section applies if:

(a) you own *shares in a company or an interest in a trust; and

(b) under subsection 112-175(2), you are taken to have sold the shares or interest (the deemed sale ) and acquired them again; and

(c) *CGT event K6 happens on 30 June 2027 as a result of the deemed sale, and you make a *capital gain from this CGT event (the initial notional gain ); and

(d) you continue to hold the shares or interest until a *realisation event happens in relation to them on or after 1 July 2027.

Disregard the initial notional gain because it is to be deferred

(2) Disregard the initial notional gain, except for the purposes of subsection (3).

Deferring an initial notional gain

(3) For the purposes of Division 102:

(a) in the income year in which the *realisation event happens in relation to the *CGT asset - you are treated as having made a *capital gain ( your deferred gain ):

(i) for the *CGT event K6 mentioned in paragraph (1)(c); and

(ii) that is a *discount capital gain if the initial notional gain is a discount capital gain; and

(iii) that is equal to the amount of the initial notional gain; and

(b) disregard section 102-20 in relation to your deferred gain.

Note 1: If the initial notional gain is a discount capital gain, then under step 5 of the method statement in subsection 102-5(1), the 50% discount mentioned in paragraph 115-100(aa) or (ab) can apply to your deferred gain.

Note 2: For a trust, a beneficiary of the trust may also be taken to have made, because of section 115-215, a capital gain in relation to the deferred gain.

112-185 Method for apportioning capital gains and losses between realisation events and earlier deemed CGT events

(1) The Minister may, by legislative instrument, determine a method for apportioning *capital gains and *capital losses between:

(a) *realisation events happening on or after 1 July 2027 in relation to *CGT assets; and

(b) earlier *CGT events relating to those CGT assets that are taken to have happened under subsection 112-155(2), 112-165(2) or 112-175(2).

(2) For such a *CGT asset, such a method must take into account:

(a) the *acquisition of the *CGT asset that is taken to have happened under paragraph 112-155(2)(b), 112-165(2)(b) or 112-175(2)(b); and

(b) any expenditure (including indexation) in an element of the *cost base or *reduced cost base of the CGT asset on or after 1 July 2027; and

(c) any other matter the Minister considers relevant.

(3) For such a *CGT asset, such a method must enable the following to be worked out:

(a) the *capital proceeds for the sale of the CGT asset that is taken to have happened under paragraph 112-155(2)(a), 112-165(2)(a) or 112-175(2)(a);

(b) the *cost base and *reduced cost base of the CGT asset when it is taken to have been *acquired under paragraph 112-155(2)(b), 112-165(2)(b) or 112-175(2)(b).

The method may also enable other things to be worked out.