Portfolio — 19 May 2026

Assistant Treasurer Daniel Mulino used a media release today to set out the government's capital gains tax reform in detail, framing it as a structural correction to a distortion that has persisted since 1999 [TA-260519-treasu-096cdb17354f]. The centrepiece of the reform is the replacement of the 50 per cent CGT discount — which Mulino characterised as arbitrary — with inflation-adjusted indexation applied uniformly across all asset classes.

The government's case rests on two pillars: fairness and neutrality. By taxing only real gains rather than nominal ones, the portfolio argues the new system avoids penalising long-held assets while also removing the incentive to favour one asset class over another. Treasury analysis released alongside the announcement supports this framing, placing the effective CGT rate for the highest income bracket in the mid-30s after indexation — a level the release notes is comparable to many European jurisdictions and below the United States rate [TA-260519-treasu-096cdb17354f].

The behavioural distortions Mulino cited are specific and pointed. Under the former discount regime, the number of taxpayers declaring dividends fell while those filing stand-alone property returns rose — a pattern the government attributes directly to the incentive structure the discount created. Removing that incentive, by the government's account, reorients investment decisions toward economic fundamentals rather than tax arbitrage.

The most politically significant signal in today's release is the acknowledgment of a tension within the reform itself. Mulino confirmed Treasury has opened a consultation with the start-up sector to address concerns that businesses with low or zero cost bases — where indexation provides little or no relief — may face a heavier effective tax burden than under the old discount.

This is a live pressure point: the start-up and innovation ecosystem has been a consistent voice in the CGT debate, and the government's decision to begin a dedicated consultation rather than address the concern in the primary design suggests it remains unresolved. Policy staff should track whether the consultation produces a bespoke carve-out, a transitional arrangement, or a conclusion that the concern is overstated.