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

8   Subsection 110-36(1)

Repeal the subsection, substitute:

Indexation for working out capital gains of Australian resident individuals or trusts for CGT events happening on or after 1 July 2027

(1A) The cost base of a *CGT asset also includes indexation of the elements of the cost base (except the third element) for the purposes of working out the *capital gain of an individual or a trust from a *CGT event happening in relation to the CGT asset if:

(a) the CGT event happens on or after 1 July 2027; and

(b) the requirements of Division 114 are met.

Note 1: This subsection does not extend to foreign residents or temporary residents (see section 114-25).

Note 2: This subsection is mainly relevant for a trust to the extent that the trust's beneficiaries are individuals who are Australian residents (see Subdivision 115-C and section 114-25).

Note 3: This subsection extends to the capital gain of an individual that is attributable to a partnership of which the individual is a partner.

Note 4: If an asset (including a pre-CGT asset) was held on 30 June 2027, it may be taken to have been sold just before, and reacquired on, 1 July 2027 (see subsections 112-155(2), 112-165(2) and 112-175(2)). For such an asset, indexation because of this subsection will happen only for the period the asset is held on or after 1 July 2027 (see subsection 960-275(1B)).

Indexation for working out capital gains in other circumstances

(1) The cost base of a *CGT asset also includes indexation of the elements of the cost base (except the third element) for the purposes of working out the *capital gain of an entity from a *CGT event happening in relation to the CGT asset if:

(a) the most recent *acquisition of the CGT asset is at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999; and

(b) for an entity that is an individual or a trust - the CGT event happens before 1 July 2027, and not because of subsection 112-155(2) or 112-165(2); and

(c) the requirements of Division 114 are met.

Note: For paragraph (b), indexation is not applicable for working out a capital gain arising:

(a) directly from a CGT event taken to have happened under subsection 112-155(2); or

(b) directly or indirectly from a CGT event taken to have happened under subsection 112-165(2).

Instead, capital gains from such CGT events may be discount capital gains.