If you have read anything about the capital gains changes starting on 1 July 2027, you have probably seen some version of this: "investors will need to elect to reset the cost base of assets they already hold."
For ordinary assets — listed shares, most property — that is wrong, and it is the kind of wrong that costs people money. Somebody who believes there is a form to lodge either goes looking for one that does not exist, or worse, assumes that because they did nothing, nothing happened to them.
Here is what the legislation actually says.
Who the change applies to
The change comes from the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49, 2026), which received Royal Assent on 26 June 2026.
Schedule 1 item 28 replaces the 50% CGT discount for individuals and for trusts other than complying superannuation entities. Partnerships are not in the provision — a partnership does not make a discount capital gain in its own right, and a partner's share flows through to them. Complying super funds keep their existing 33⅓%.
Two things it does not do, which most summaries skip:
- It is not a blanket abolition. A discount of at least 50% survives after 1 July 2027 where the CGT event relates to a new residential dwelling (s115-102) or to the provision of affordable housing (s115-125, up to 60%). Item 27 appends a sentence to the s115-1 Guide saying exactly that.
- The replacement is not "a 30% rate on capital gains." It is cost-base indexation, plus a separate top-up under s119-10 calculated on a "minimum tax capital gain" (s119-5) — a defined subset that expressly excludes gains covered by s115-102 or s115-125. It is extra tax on top of your ordinary assessment, worked out through a seven-step method statement, and it only applies to individuals who were Australian residents at some point in the year. Receiving any of the listed income-support payments exempts the whole income year from it (s119-15).
The reset itself
For an asset you already hold, section 112-155(2) says you are taken:
"(a) to have sold the asset just before 1 July 2027 ... and (b) to have *acquired the asset again just after that sale for an amount equal to those capital proceeds"
That is a deeming provision. It describes something the law does to you. It is not conditional on anything you file, tick or choose.
Section 112-155(3)(a) sets those capital proceeds as, "unless paragraph (b) applies", the asset's *market value just before 1 July 2027.
(Those asterisks are the Act's own marker for a defined term, not emphasis.)
So on the morning of 1 July 2027, an asset caught by this section has a new cost base equal to what it was worth the day before, whether you did anything or not.
"Caught by this section" is doing work. s112-155(1) sets five conditions: the asset is not a pre-CGT asset; you are an individual who held it across the date; you still hold it when the real sale happens; s115-105 (foreign and temporary residents) would not apply; and the asset is not one where s115-102 or s115-125 applies. Trusts get the equivalent treatment under s112-165. Pre-CGT assets go to s112-175 instead, and there the notional gain is disregarded under s104-10(5) rather than deferred — a genuinely different outcome. (One exception: s112-180 does defer a CGT event K6 gain arising from the same deemed sale of shares or trust interests.)
Nothing is taxed at the reset
This is the second thing people get wrong, usually in the opposite direction — panic that a deemed disposal means a tax bill in 2027.
It does not. Section 112-160(2):
"Disregard the initial notional gain or the initial notional loss, except for the purposes of subsection (3) or (4)"
The Act's own note to s112-155(2) puts it plainly: any gain or loss from the deemed sale "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".
So nobody gets an assessment in 2027 for an asset they still own. What the reset does is split your ownership into two periods with different rules.
Two mechanics almost nobody mentions
Your 12-month clock is not reset. This is the one most likely to surprise you, and it runs in your favour. Section 112-160(3)(c) says that in working out whether the deferred gain qualifies for the discount, you "treat the deemed CGT event as if it happens on the day the realisation event happens". (Item 20's s114-10(9) does the same look-through for the separate 12-month rule that governs indexation — a different rule, in a different Division.)
Concretely: buy a parcel on 1 May 2027, hold it through the reset, sell it in 2029. The pre-reset portion of your gain still gets the 50% discount, because the clock runs from when you actually bought to when you actually sold — not to 30 June 2027. If you have read that a parcel bought shortly before the reset loses the discount on its pre-reset half, that is not what the Act says.
The 30% floor never touches your pre-reset gain. The minimum tax capital gain in s119-5 is defined over "residential" and "non-residential" capital gains. The deferred pre-reset gain sits in its own categories under s102-6(3)-(4), outside that definition — so the whole of the half that keeps its 50% discount is also outside the s119-10 top-up.
A loss on one side offsets a gain on the other. Section 112-160(4) makes a deferred notional loss a real capital loss in the year of the actual sale, and the substituted s102-5(1) applies that year's losses against that year's gains before any discount percentage is applied.
Concretely: a parcel that cost $50,000 and is worth $30,000 at the reset carries a $20,000 deferred loss. Sell it later for $45,000 and the post-reset gain is real, but the deferred loss comes off it first. You are not taxed on the second leg while the first leg's loss sits idle.
The choices that genuinely exist
An apportioning method instead of market value. Section 112-155(3)(b) lets you choose "an apportioning method determined under section 112-185" as the capital proceeds. That changes how the reset is measured, not whether it happens.
Worth knowing: that method does not exist yet. s112-185 delegates it to a Ministerial legislative instrument, and as things stand only a Treasury exposure draft has been released (released 4 August 2026, consultation open until 21 August 2026). Treasury describes the draft as covering real property and assets without a readily ascertainable market value — a characterisation of a draft, not of law. Until an instrument is made, there is nothing to choose.
And there is no rush regardless: s112-155(4) with s103-25(1)(a) means the choice need not be made until you lodge the return for the year your actual sale happens. Which is the most direct answer to "is there something I need to lodge in 2027" — no.
Opting out of the surviving discount. For the two asset classes where the discount survives, s115-102(5) lets you choose for it not to apply, taking indexation instead; s115-125(6) does the same for affordable housing, but only where the full 60% would otherwise result. Because s112-155(1)(e) excludes those assets from the reset, that choice is what determines which regime you land in. This is the one place where a taxpayer election really does switch the reset on and off — and it is probably where the "you must elect" story came from.
What the reset changes in practice
Nothing about paperwork. What it changes is what is worth knowing before the date rather than after it.
Your 30 June 2027 market values are only observable once. The reset fixes each asset's new cost base at that day's value. If you cannot evidence what something was worth then, you will be reconstructing it later from whatever records survive.
Parcels bought at different times land differently — but not for the reason usually given. They arrive at the date with different unrealised positions, and (per the 12-month point above) the discount on the pre-reset portion turns on your real holding period, not the reset date.
Whether to sell before 1 July 2027 is a calculation, not a rule of thumb. Whether disposing earlier produces a higher or lower total tax outcome depends on the parcel's unrealised position, how long you have held it, your marginal rate and when you would otherwise sell. Note also that selling and re-establishing the same position can attract the ATO's wash-sale rules — see Taxpayer Alert TA 2008/7 and the companion ruling TR 2008/1.
Where to check your own position
Our 2027 tax changes explainer covers the wider set of changes, including the separate negative-gearing measure. On that one, two details that are usually stated too simply: it applies from the 2027-28 income year onwards, not from the 12 May 2026 cutoff date; and the carve-out in s26-155(2) turns on when you last acquired the ownership interest, plus a "new residential dwelling" category whose boundary is not yet settled. As enacted, s26-160(3)-(4) delegates it to a Ministerial instrument; Treasury's tranche-2 exposure draft of 4 August 2026 instead proposes putting the final definition into primary legislation. Neither has happened. A third carve-out in s26-155(2)(c) — dwellings used for a purpose the Minister determines, aimed at social and affordable housing — is also still empty.
If you want the reset run across the parcels you actually hold, the 2027 Reset Planner does that — each parcel's verdict on a free account, with the tax comparison and the indexed cost base behind each one in Pro.
General information only, current as at 12 August 2026, and not personal tax or financial advice. Section references are to the Income Tax Assessment Act 1997 as amended by the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, checked against the authorised text on the Federal Register of Legislation. Two things this article relies on are not yet settled law: the s112-185 apportioning method is still an exposure draft, and the definition of a "new residential dwelling" is unmade — currently delegated to a Ministerial instrument, with a Treasury draft proposing it move into primary legislation instead. Your circumstances change the answer — check anything here with your accountant before acting on it.