Should you sell before the tax rules change? 5 things investors need to know

Australia’s looming tax changes have created an unusual problem for investors.

We know the rules are changing from 1 July 2027. We know the 50% CGT discount is being replaced by cost-base indexation, which, as we’ve shown in previous case studies, can leave growth investors worse off.

And we know the minimum 30% tax rate on capital gains could materially worsen outcomes for investors in lower tax brackets.

The burning question is: What should investors do before 1 July 2027?

I spoke with Vincent Stranges, Head of Product at Generation Life, to find out. His message was reassuring:

“Don't let the deadline make the decision for you.”

Here are five things investors should be thinking about over the next ~10 months.

1. Don’t sell just to beat 1 July 2027

Perhaps the biggest misconception is that investors need to sell appreciated assets before 30 June 2027 to preserve their existing tax treatment. As Stranges explains:

“Gains that build up before 1 July 2027 stay under the current rules regardless of when you eventually sell. That means there may be no cost to waiting – and no reward for rushing."

Imagine you own shares in a growth company that have appreciated by $500,000 over the past decade to 30 June 2027. That historical gain does not suddenly get dragged into the new regime on 1 July 2027.

"For investors who remain comfortable holding the asset, there may therefore be little benefit in rushing to sell solely because of the deadline. Treat the deadline as a prompt to review your position, not the reason to sell," Stranges says.

2. When crystallising gains could make sense

That doesn’t mean nobody should consider selling before 1 July 2027. If a sale was already on the cards, bringing it forward could make sense.

“Those who were already planning to sell, rebalance or reduce a concentrated holding may want to assess whether crystallising the gain before 1 July 2027 could improve their after-tax outcome," Stranges says.

That could also apply to investors who expect an asset’s future capital growth to be more subdued.

But tax isn’t the only consideration. Selling can mean transaction costs, giving up potential returns and having to find a replacement investment.

There is also value in delaying a tax bill, allowing money that would otherwise have gone to the ATO to remain invested and compounding.

“The key point is that deferring the realisation of a gain can have significant value over time.”

3. Where you hold your investments could matter more

Investors spend enormous amounts of time thinking about what they own. But the changes could make where they own it increasingly important.

Personal ownership provides accessibility and control over when gains are realised. Trusts can remain useful for succession and asset protection. Companies provide a predictable tax rate but lose the 50% CGT discount and raise the question of how capital is eventually extracted tax effectively.

And then there is super.

"Super is still a good option for retirement savings, particularly for those with balances below $3m – but it has ceilings.

Contribution caps, preservation rules, and Division 296 tax on earnings on balances above $3m all mean that once a member’s super's maxed out, they may want somewhere else for their savings to go."

The broader lesson is that diversification can extend beyond asset classes. Holding wealth across different tax treatments and income sources can provide greater flexibility when the rules change.

4. The investment structure getting another look

Once you've exhausted your super contribution opportunities, where does the next dollar go?

Stranges says that question is prompting renewed interest in investment bonds – tax-paid structures that provide another option for building long-term wealth outside super.

“Say you've used up your super contributions and want to continue to invest and build wealth outside super. An investment bond holding could offer an attractive after-tax return outcome as well as no extra personal tax after 10 years," he says.

That doesn't automatically make investment bonds superior to personal ownership, trusts, companies or super.

Instead, Stranges says the appropriate structure should be guided by three things: your investment timeframe, how much access you need to your money and what you're trying to achieve.

5. Retirees: Don’t overhaul your strategy just yet

For retirees and those approaching retirement, Stranges’ message is similar: review your strategy, but don’t make wholesale changes because the rules are moving.

“The day-to-day picture hasn't actually changed much – income drawn from an allocated pension should still be largely untouched by any of this, with the exception of the minimum 30% tax on future realised capital gains, which may have an impact on retirees going forward," he says.

Instead, the next 12 months can be used to identify what is genuinely affected and whether changes would produce a meaningful benefit after tax, costs and complexity.

There may also be value in diversifying retirement income. Stranges says retirees with savings across different tax treatments and income sources generally have more room to adjust as rules change.

Some could also consider combining an allocated pension with a market-linked lifetime income stream, balancing flexibility with greater certainty that a portion of income will continue for life.

Ultimately, the objective isn't to predict the government's next move. It's to build a retirement strategy that can adapt when the rules change again.

Or, as Stranges puts it:

“Chasing policy isn’t a strategy.”

Read next: The tax move investors still have time to make

In the previous article in this series, Evalesco financial adviser Melody Edwards explains how investors can currently use carry-forward concessional super contributions to offset substantial capital gains - and why that strategy could become less effective once the new rules begin.

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