Treasurer Jim Chalmers told parliament his capital gains overhaul was "the most ambitious tax reform package for a quarter of a century". The Act he pushed through in June runs to 73 pages, rewrites how every share portfolio, investment property and family heirloom in the country is taxed, and never once uses the word death.
The same Act plants a frozen tax bill on everything you own at 30 June 2027. It doesn't fall due when the law starts. It falls due at what the legislation calls a "realisation event", and the Act never says a death in the family isn't one.
The professional bodies that reviewed the bill told parliament its interactions with the existing rules were left unresolved. The law, as passed on 26 June, still doesn't settle them. And this is a Treasurer who has already proven he understands the politics of taxing the dead: he scrapped one measure critics called a death tax just 8 days before this law was given royal assent.
Every asset you own gets a frozen tax bill on 30 June 2027
Capital gains tax is the tax on the profit you make on an asset, and since it began in 1985 it has worked on one principle: you pay when you sell, because that's when the money exists. Hold a share portfolio for 30 years and the taxman waits 30 years for his cut.
Chalmers' law keeps the tax and removes the certainty about the waiting. From 1 July 2027 the 50% capital gains discount is abolished for individuals and replaced with an inflation adjustment, plus a minimum tax rate of 30% on gains for most taxpayers, whatever they earn.
Age pensioners and other income support recipients are carved out of the minimum rate, but not out of losing the discount. To draw the line between old gains and new ones, the Act treats every asset you hold on 30 June 2027 as sold that night at market value and bought back the next morning. No money changes hands. The paper gain is locked in and, in the Act's own words, "disregarded (and deferred) until the income year in which the realisation event happens".
The government does hold one concession back. Investors who buy newly built homes can choose to keep the old 50% discount, and new builds and affordable housing are carved out of the deemed sale entirely. That's the answer Labor reaches for when it's accused of hitting ordinary owners. It does nothing for the family that already owns the shares, the rental or the house, because the carve out follows the new dwelling, not the taxpayer.
Profit built up before 1 July 2027 keeps the old half price discount. Anything after that date gets the new rules. Law firm Corrs Chambers Westgarth says the same thing: the frozen profit is "deferred until an actual realisation event that occurs later".
The government's own budget material promises that "the CGT reforms will only apply to gains arising after 1 July 2027". The Act does no such thing. Older profits are only put off, and every dollar of them is still owed. Nobody will say what pulls the trigger.
| The question | How it's worked for 40 years | What Chalmers' law does |
|---|---|---|
| When is your tax bill worked out? | The day you sell. That's when you have the money to pay it. | On 30 June 2027, whether you sell or not. The taxman pretends you sold everything that night and bought it back the next morning. Nothing is really sold and no money changes hands. |
| When do you actually pay it? | When you sell, out of the money from the sale. | The bill sits there frozen until what the Act calls a "realisation event". That means any change of ownership, not just a sale. The Act never says whether a death is one. |
| How much of your profit is taxed? | Half of it, on anything you've owned for more than a year. | All of it, on growth after 1 July 2027, with a small allowance for inflation. The half price deal is gone. |
| What rate do you pay? | Whatever your normal tax rate is, so if you earn little you pay little. | At least 30%, even if you earn almost nothing. Age pensioners escape the 30% floor, but they still lose the half price deal. |
| What about the profit you've already made? | Left alone. You're taxed on it only if and when you decide to sell. | The government calls it protected, but it's only postponed, and every dollar of it is still owed by somebody. |
The word missing from all 73 pages is death
Since 1985 the rule on dying has been simple. Death is not a taxable event. Under Division 128 of the tax law, your assets pass to your estate and your family, the tax bill travels with the asset, and nobody pays anything until the family chooses to sell. That rule is why Australia can say it has no death duties: the Commonwealth and every state abolished them more than 4 decades ago, and every government since has left the grave alone.
Chalmers' Act doesn't abolish that rule so much as ignore it. One News searched the full text of the Act: death is never mentioned, deceased estates are never mentioned, Division 128 is never mentioned, and the rollover that protects couples transferring assets in a divorce is never mentioned. The Act doesn't even define "realisation event" afresh. It leaves the term to pick up its existing meaning elsewhere in the tax law.
That silence matters, because section 977-5 of the tax law defines a realisation event as any CGT event, bar three narrow exceptions. A CGT event is any change of ownership rather than just a sale for cash, and both dying and a divorce settlement change who owns the asset.
So when the owner of a frozen gain dies, nothing in the Act tells the taxman what to do. If a death counts, that frozen profit goes on the last tax return done in the dead person's name: no sale, no money received, and a bill the grieving family has to find the cash for. On that reading, a widow could be forced to sell down the very portfolio her husband left her, just to pay tax on shares nobody sold.
Adviser analyses of the final law say the old inheritance protection should still carry the tax bill through to the family. The Act doesn't say that, and One News could find no Treasury guidance saying it either. Families are being asked to write their wills without knowing the answer.
Chalmers already scrapped one death tax. This one stayed
Chalmers knows exactly how a death tax plays with voters, because he's already retreated from one. His 12 May budget slapped a 30% minimum tax on testamentary trusts, the structures written into wills to pass wealth to children. Farmers and family businesses called it a tax on dying. On Thursday, 18 June, he folded.
"Income from all types of testamentary trust will be exempt from the minimum tax," Chalmers announced, in a retreat that, together with a matching concession for small business, cost the budget $475 million over 4 years.
The government sold that retreat as proof it listens. It's proof of something harder. Chalmers designed a tax that fell on families at the moment of a death, took it to a budget, defended it for 5 weeks, then dropped it when farmers and family businesses turned on him. He got it wrong, and the backdown is his own admission of that.
The principle he gave way on, that a family shouldn't be handed a tax bill because someone died, runs straight through the rest of his own Act. It reaches further than the trust measure ever did, to every family with a share portfolio or an investment property, and it stayed in the bill. The whole package was law 8 days after the backdown. The death tax with a headline died. The one nobody had noticed was given royal assent.
Chalmers told parliament the grandfathering of negative gearing "ensures that taxpayers who made investment decisions under the existing rules will not be affected by the changes". No equivalent assurance appears anywhere in the Act for what happens to a frozen capital gain when its owner dies.
What changes for your family the day you die
Here's what the law does to the things people actually leave behind, from the share portfolio to the wedding rings. Every will in Australia was written under the old rules, and from 1 July 2027 they all have to work under the new ones.
| The life event | Until 30 June 2027 | From 1 July 2027 |
|---|---|---|
| You die owning shares or an investment property | No tax. Your family inherits, and pays only if and when they sell. | Everything you own has a tax bill sitting against it from 30 June 2027. The law never says that bill waits until your family sells. Advisers warn it can land on the last tax return done in your name. |
| Your family sells an inherited asset | One tax bill, with half the profit knocked off before it's taxed. | Two bills, because the older profit still gets half knocked off while anything it went up after 1 July 2027 gets no discount and is taxed at a minimum of 30%. |
| A divorce settlement moves an asset between spouses | No tax at all, because handing the asset to your ex costs nothing. | The Act is silent on whether the transfer sets off the frozen bill. |
| The family home | No tax. The home you live in has always been exempt. | Still no tax on the home itself. But if there's a tax bill on everything else and no cash to pay it, selling the house can be the only way to find the money. |
| Jewellery and heirlooms bought for more than $500 | Taxed only if you actually sell them, so family treasures get handed down untouched. | Get valued on 30 June 2027 and carry a tax bill from that day on, with the same unanswered question about death as everything else. |
| Assets owned since before CGT began in 1985 | Never taxed. | Growth after 1 July 2027 is taxed, for the first time in 40 years. |
| An asset sitting on a paper loss | If something drops in value, you can use that loss to cut the tax on things that went up. | That loss gets frozen too, and if there's nothing left to use it against when you die, it's simply lost, while the tax still gets charged on everything that went up. |
One portfolio, one death, two tax bills
Put numbers on it and you see why advisers are alarmed. Take a retired couple who bought shares in 1998 for $150,000, now worth $1,150,000. Here's what one death sets off.
The figures are an illustration, using the top tax rate of 47% including the Medicare levy. They're exactly the kind of sum the government hasn't published.
| When | What happens | The tax bill, and who pays it |
|---|---|---|
| 30 June 2027 | A couple bought shares in 1998 for $150,000 and today they're worth $1,150,000. On this night the taxman pretends they sold them, even though they didn't. He writes down their $1,000,000 profit and keeps it on file. | You pay nothing at all, with no bill, no letter and nothing to do. The $1,000,000 is the profit on paper, not money you owe. It just sits there waiting. |
| He dies in 2028 | The husband dies. When someone dies, one last tax return has to be done for them. If the law works the way advisers fear, that $1,000,000 profit goes on it. Half comes off, so $500,000 gets taxed. | A bill of up to about $235,000. It comes straight out of what he left behind, before his wife sees a cent of it. |
| The shares are sold in 2029 | Nobody has that kind of cash lying around, so the shares have to be sold to pay the first bill. But they've gone up another $100,000 since 2027, and that rise gets taxed too, this time with no half price discount. | A second bill of about $30,000, again paid out of what he left behind. |
| Total | Two tax bills on one lot of shares that the couple bought and paid for 30 years ago. Both come out of the money he meant his wife to have. | About $265,000 gone. That's more than a fifth of what he left her. |
The experts told him the law had holes. It passed anyway
None of this ambushed the government. The Tax Institute told the Senate inquiry the bill contained "material technical gaps, unresolved interactions and areas of uncertainty", with core design elements "deferred to legislative instruments". In plain English, parliament passed the tax and left the rules to be filled in later by the minister's pen. CPA Australia warned the legislation risks creating a more complex and uncertain tax system.
One News reported in June that the promise to protect existing owners falls apart on a death or a divorce, with a jointly owned property losing that protection on the departing share. The Act that emerged from the Senate fixed none of it.
The deemed sale happens on 30 June 2027, 11 months from now. From the next morning, every family in the country inherits the question this Act never answers. Until Treasury or the courts supply the missing word, what happens to your family when you die is governed by a law that never mentions death at all.
