Overview
The Australian government has introduced new capital gains tax (CGT) rules that include a 30% minimum tax rate on real capital gains accruing from July 1, 2027. Recipients of income support payments, such as Age Pension and JobSeeker, are exempt from this minimum rate.
The measure is intended to prevent taxpayers from selling assets during low-income periods to reduce tax liability, while protecting vulnerable low-income individuals.
Key Details
- The 30% minimum tax rate applies to real capital gains (adjusted for inflation) from July 1, 2027.
- Exemptions are granted to recipients of certain government payments, including Age Pension and JobSeeker.
- Exempt individuals will be taxed on capital gains at their marginal tax rate after applying the inflation-adjusted CGT discount.
Treasurer Jim Chalmers stated: "The minimum tax reduces the incentive to defer realising capital gains until marginal tax rates are low, and better aligns the tax rate on gains with the tax rates paid by most workers."
Impact on Age Pension Recipients
Approximately 2.67 million Australians receive Age Pension, 860,000 of whom are part-pensioners (about 63% of Australians over 67).
- Eligibility requirements: Being 67 years old, an Australian resident, and passing income and asset tests.
- Income cut-off: $2,619.80 per fortnight (singles), $4,000.80 per fortnight (couples).
- Asset cut-off: $722,000 (single homeowners), $1,085,000 (couple homeowners); for non-homeowners: $980,000 (singles), $1,343,000 (couples). The family home is not counted in the assets test.
Financial Adviser Expectations
Financial advisers anticipate increased interest in part-pension strategies to reduce tax liabilities under the new rules.
Perks Private Wealth adviser Emma Burckhardt noted that advisers would consider age pension strategies for clients near the eligibility borderline, but not at the expense of long-term wealth.