Meet Jan. She bought a house as an investment property for an initial cost of $1m.

Five years later, she sells it for $1.4m. This represents an annual price growth of 7%, which is a realistic increase seen in some Australian capitals.

*Numbers in this graphic will

be rounded for ease of reading

Jan has made capital gains of about $400,000 simply by having enough money to invest in property. Well done, Jan!

So how do the government’s changes to the capital gains tax affect how much tax Jan has to pay?

Under the old scheme, Jan would get a flat 50% discount on the taxable portion of the capital gains.

50%

CGT discount

Let’s say that Jan earns an annual salary of $100,000. So this puts her total taxable income at about $300,000.

However, under the new scheme, the flat 50% discount has been abolished. Instead, Jan needs to take the initial cost of her investment and calculate how much it would be now with inflation.

2.5%

annual inflation

Then, to get the new taxable capital gains amount, Jan needs to find the difference between the sale price and the initial price that has been adjusted for inflation.

If we compare the two outcomes side-by-side, we can see that the new scheme means Jan’s taxable income is now higher...

... and this means that Jan will owe more tax under the new scheme than the old.

However, this is just one example and the changes are complex! If assets have lower growth (like stocks or apartments), or if inflation is higher, investors might pay less capital gains tax under the new scheme.

This also doesn’t take into account the negative gearing changes.

But the bigger picture is that Treasury modelling suggests that with both the CGT and negative gearing changes, an additional 75,000 Australians will become homeowners over the next decade.

Meet Jan. She bought a house as an investment property for an initial cost of $1m.

Five years later, she sells it for $1.4m. This represents an annual price growth of 7%, which is a realistic increase seen in some Australian capitals.

*Numbers in this graphic will

be rounded for ease of reading

Jan has made capital gains of about $400,000 simply by having enough money to invest in property. Well done, Jan!

So how do the government’s changes to the capital gains tax affect how much tax Jan has to pay?

Under the old scheme, Jan would get a flat 50% discount on the taxable portion of the capital gains.

50%

CGT discount

Let’s say that Jan earns an annual salary of $100,000. So this puts her total taxable income at about $300,000.

However, under the new scheme, the flat 50% discount has been abolished. Instead, Jan needs to take the initial cost of her investment and calculate how much it would be now with inflation.

2.5%

annual inflation

Then, to get the new taxable capital gains amount, Jan needs to find the difference between the sale price and the initial price that has been adjusted for inflation.

If we compare the two outcomes side-by-side, we can see that the new scheme means Jan’s taxable income is now higher...

... and this means that Jan will owe more tax under the new scheme than the old.

However, this is just one example and the changes are complex! If assets have lower growth (like stocks or apartments), or if inflation is higher, investors might pay less capital gains tax under the new scheme.

This also doesn’t take into account the negative gearing changes.

But the bigger picture is that Treasury modelling suggests that with both the CGT and negative gearing changes, an additional 75,000 Australians will become homeowners over the next decade.

Meet Jan. She bought a house as an investment property

for an initial cost of $1m.

Five years later, she sells it for $1.4m. This represents an annual price growth of 7%, which is a realistic increase seen in some Australian capitals.

*Numbers in this graphic will

be rounded for ease of reading

Jan has made capital gains of about $400,000 simply by

having enough money to invest in property. Well done, Jan!

So how do the government’s changes to the capital gains tax

affect how much tax Jan has to pay?

Under the old scheme, Jan would get a flat 50% discount on the taxable portion of the capital gains.

50%

CGT discount

Let’s say that Jan earns an annual salary of $100,000. So this

puts her total taxable income at about $300,000.

However, under the new scheme, the flat 50% discount has been abolished. Instead, Jan needs to take the initial cost of her investment and calculate how much it would be now with inflation.

2.5%

annual inflation

Then, to get the new taxable capital gains amount, Jan needs to find the difference between the sale price and the initial price that has been adjusted for inflation.

If we compare the two outcomes side-by-side, we can see that the new scheme means Jan’s taxable income is now higher...

... and this means that Jan will owe more tax under the new scheme than the old.

However, this is just one example and the changes are complex! If assets have lower growth (like stocks or apartments), or if inflation is higher, investors might pay less capital gains tax under the new scheme.

This also doesn’t take into account the negative gearing changes.

But the bigger picture is that Treasury modelling suggests that with both the CGT and negative gearing changes, an additional 75,000 Australians will become homeowners over the next decade.

Meet Jan. She bought a house as an investment property for an initial cost of $1m.

Five years later, she sells it for $1.4m. This represents an annual price growth of 7%, which is a realistic increase seen in some Australian capitals.

*Numbers in this graphic will

be rounded for ease of reading

Jan has made capital gains of about $400,000 simply by having enough money to invest in property. Well done, Jan!

So how do the government’s changes to the capital gains tax affect how much tax Jan has to pay?

Under the old scheme, Jan would get a flat 50% discount on the taxable portion of the capital gains.

50% CGT discount

Let’s say that Jan earns an annual salary of $100,000. So this puts her total taxable income at about $300,000.

However, under the new scheme, the flat 50% discount has been abolished. Instead, Jan needs to take the initial cost of her investment and calculate how much it would be now with inflation.

2.5%

annual inflation

Then, to get the new taxable capital gains amount, Jan needs to find the difference between the sale price and the initial price that has been adjusted for inflation.

If we compare the two outcomes side-by-side, we can see that the new scheme means Jan’s taxable income is now higher...

... and this means that Jan will owe more tax under the new scheme than the old.

However, this is just one example and the changes are complex! If assets have lower growth (like stocks or apartments), or if inflation is higher, investors might pay less capital gains tax under the new scheme.

This also doesn’t take into account the negative gearing changes.

But the bigger picture is that Treasury modelling suggests that with both the CGT and negative gearing changes, an additional 75,000 Australians will become homeowners over the next decade.