The natural worry about the 2027 CGT reform, if you hold shares or ETFs, is that a portfolio built from dozens of small parcels is about to become dozens of separate indexation calculations. A decade of dividend reinvestment, five years of dollar-cost averaging, and every one of those parcels now needing its own indexed cost base.
That is not what happens. For everything you already hold, the reform does close to the opposite — and understanding which half of your tax bill your purchase history still drives is the whole game.
Everything you hold is deemed sold and rebought
The mechanism is not a gradual switchover. Section 112-155(2) says you are taken "to have sold the asset just before 1 July 2027" and "to have acquired the asset again just after that sale". The price for both sides is the asset's market value just before 1 July 2027 (s112-155(3)).
Three things follow, and each one surprises people.
It is automatic. There is nothing to elect and nothing to lodge. The Act allows capital proceeds to be worked out by an apportioning method instead, but only one "determined under section 112-185" — and no such determination has been made, so in practice every parcel gets the market-value reset.
Nothing is taxed at the reset. Section 112-160(2) says to disregard the notional gain or loss the deemed sale creates. You do not pay tax in 2027 on a sale you did not make. The gain is deferred until you actually sell.
Your holding is split in two. From then on any parcel has a pre-reset half — original cost base up to the 30 June 2027 market value — and a post-reset half, from that market value to what you eventually sell for.
The part that runs backwards: parcels stop mattering for the new rules
Here is the consequence almost nothing about this reform states plainly.
After the reset, every parcel of the same holding has the same cost base per unit — the one market value — and the same reacquisition date. So the post-reset half of your gain is identical per unit whether you bought that parcel in 2019 or two months before the reset. Indexation runs from one common starting point for all of them.
Two parcels, one reset
Why buying dates stop mattering after 1 July 2027
| Parcel | Pre-reset half | Post-reset half | Taxable gain |
|---|---|---|---|
| Bought 2019eight years of growth | $2,000.00after 50% discount | $1,574.00 | $3,574.00 |
| Bought May 2027two months before the reset | $250.00after 50% discount | $1,574.00 | $1,824.00 |
Both parcels sold on the same day, resident individual, illustrative CPI movement between the reset and sale. Run one parcel properly in the CGT Calculator 2027 New Rules.
Two parcels of the same stock, one bought years ago at $20 and one bought shortly before the reset at $55, both worth $60 at 30 June 2027 and both sold later at $80. The post-reset column is the same figure for both. It has to be: after 1 July 2027 they are the same asset, bought on the same day, for the same price.
So the DRP worry is misplaced for anything already held. Ten years of reinvested dividends do not create ten indexation calculations. They create ten parcels that all collapse to one cost base on 1 July 2027.
Where you will get genuinely separate indexation calculations is parcels you buy after the reset. Those each start their own clock, so from July 2027 onward a DRP really does build up parcels with distinct indexed cost bases.
The part where your purchase history matters more than ever
None of that means you can throw away your records. The opposite — and for a sharper reason than the one usually given.
The pre-reset half of each parcel is worked out from that parcel's own original cost base against the 30 June 2027 market value. Get the cost base wrong and that half is wrong.
More than that, the pre-reset half is the half that can still carry the 50% discount, and whether it does depends on that parcel's own real acquisition date. There is a trap in how that test is applied. You might assume a parcel bought in May 2027 fails the 12-month rule, having been held only two months at the reset. It does not. Section 112-160(3)(c) requires the 12-month test to be applied as if the deemed event happened on the day of the actual sale, and Schedule 1 item 20 reinforces it by telling you to disregard the deemed sale entirely for that rule. Sell in 2029 and a parcel bought in May 2027 has been held over two years — the discount applies to its pre-reset half.
That makes the surviving discount considerably more valuable than most people expect, and it makes each parcel's true acquisition date a permanent record you need, long after the reset has made those dates irrelevant to the other half.
A loss on one side offsets the other
If a parcel is worth less at 30 June 2027 than you paid for it, the reset creates a notional loss rather than a gain. That loss is not wasted. Section 112-160(4) turns it into a real capital loss in the year you actually sell, and the substituted s102-5(1) Step 1 nets it against your gains for that year before any discount percentage is applied.
The ordering is worth knowing because it is not in your favour. Step 1 reduces deferred gains first, then ordinary ones. The pre-reset leg is the deferred gain and the one that carries the discount, so a loss is absorbed against the discountable half first. That produces a slightly worse outcome than if you could choose, and it is what the Act specifies.
What the reform does not touch
Dividends and franking credits are unaffected — that is a separate part of the tax law. So is the way a managed fund or ETF distributes capital gains it realises internally, which continues to flow through to you under the existing rules. What changes is how your own gain on selling your units is worked out once the 50% discount is gone for post-reset growth.
What to do with this before July 2027
Make sure every parcel's original cost base and acquisition date is recorded properly. After the reset those figures become unrecoverable from your holdings alone — the market value overwrites everything the market can tell you. Brokers change, platforms close, statements get harder to retrieve. This is the last comfortable window to reconstruct them.
Note the 30 June 2027 market value of everything you hold. It becomes the cost base of the post-reset half of every parcel, permanently.
Do not assume selling early is the answer. Crystallising a gain to use the 50% discount before it goes means paying tax years earlier than you needed to, and the pre-reset half keeps its discount anyway. The crystallise-or-hold question has a real answer that depends on your numbers, and it is not the obvious one.
Frequently Asked Questions
No. Indexation runs on the post-reset cost base only, from the reset forward — it never reaches back to your original purchase price. Everything before 1 July 2027 is handled by the deemed disposal, which values your parcel at market value on that date.
Not the ones you already hold. They all reset to the same cost base on 1 July 2027, so the post-reset half is one calculation. Parcels bought after that date do each start their own indexation clock.
Neither. It happens automatically and creates no tax in 2027 — s112-160(2) disregards the notional gain or loss until you actually sell. The alternative apportioning method the Act contemplates requires a determination under s112-185 that has not been made.
No, provided you hold it more than twelve months in total. The 12-month test is applied as if the deemed sale happened on your real disposal date, so a parcel bought in May 2027 and sold in 2029 qualifies on its pre-reset half.
The reset creates a deferred loss, which becomes a real capital loss in the year you sell and is netted against that year's gains before any discount is applied.
The same treatment applies to capital gains assessed under Australian tax law, which for an Australian resident generally covers worldwide gains. Currency movements and foreign tax paid are separate matters beyond this article.