Cost base CPI indexation is a way of working out a capital gain that lifts your cost base in line with inflation — so tax falls on the “real” gain, not the part of the increase that only reflects rising prices. CPI is the Consumer Price Index, the standard measure of inflation across the economy. Under the changes enacted in June 2026, indexation of the cost base returns for CGT events on or after 1 July 2027, and it replaces the 50% CGT discount for individuals, trusts and partnerships.

Most of that method is settled law, written into the Act itself: which cost-base elements are indexed, that indexation runs forward from when each amount was spent rather than freezing at a fixed base quarter, and a 12-month holding rule. The one piece this guide does not reproduce is the exact numeric factor — the formula that turns CPI figures into the multiplier is published as an image in the legislation, so this article does not transcribe or estimate it.

indexed cost base = cost base × indexation factor capital proceeds − indexed cost base = capital gain

The shape of the calculation is set by the Act. The exact numeric factor in that first line — the CPI ratio the cost base is multiplied by — is the one piece published only as a formula image, so no worked multiplier is given here.

What is cost base CPI indexation?

Indexation adjusts your cost base upward for inflation before the gain is worked out. The idea is that if prices across the economy rose over the years you held an asset, part of the asset’s paper increase is not a real profit — it is just the same value in cheaper dollars. Indexing the cost base removes that inflation slice, so tax applies to what is left.

It is not a new idea in Australia. A form of cost base indexation applied before the 50% discount was introduced, and the 2027 changes bring an indexation method back. The two are not the same, though: the earlier approach effectively froze indexation at a set base quarter, while the enacted 2027 method keys the indexation off when each cost-base amount was actually incurred and runs forward from that date (more on this below). Where this guide would otherwise reach for the exact numeric factor, it stops and flags the gap instead, because that formula is published only as an image in the legislation.

Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.

Is CPI indexation of the cost base actually returning in 2027?

Yes. It is enacted law, not a proposal. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received royal assent on 26 June 2026 and applies to CGT events on or after 1 July 2027. As at July 2026, the package it sits in does three things that matter here:

• The 50% CGT discount ends for individuals, trusts and partnerships. Investors who buy new builds can choose either the 50% CGT discount or indexation and the minimum tax when they sell. The existing 60% CGT discount for qualifying affordable housing is fully retained, and complying super funds keep their 33.33% discount.
• CPI indexation of the cost base returns as the replacement mechanism for those events.
• Indexation excludes the third cost base element — the ownership or holding costs described below — so not every part of the cost base is indexed.

The ATO’s overview of the reform is set out in its guidance on the 2027 changes. As at July 2026 that page is a high-level summary rather than a worked method, so it is the one to re-check — its practical detail may expand as the ATO builds out its guidance.

Which parts of the cost base can be indexed?

The cost base is broader than the purchase price. The ATO groups it into five cost base elements, and the enacted rules index some but not all of them:

Element	What it covers	Indexed from 1 July 2027?
1. Acquisition cost	The purchase price	Yes
2. Incidental costs	Stamp duty, conveyancing, agent fees	Yes
3. Ownership costs	Interest, rates, insurance, holding	No — excluded
4. Capital improvements	Renovations, extensions, fencing	Yes
5. Title costs	Defending or establishing ownership	Yes

The third element — ownership costs such as interest, rates and insurance not already claimed as deductions — is the one the Act carves out of indexation. For the elements that are indexed, the Act keys the indexation off the date each amount was incurred, so it runs forward from that date rather than from a single fixed base quarter (see the next section). The one piece the Act publishes only as a formula image, and this guide does not reproduce, is the exact numeric factor.

One point sits underneath the table. Amounts already claimed as capital works deductions — the building write-off claimed under Division 43 at 2.5% a year over 40 years for residential rental construction commenced on or after 16 September 1987 (as at July 2026) — generally reduce the cost base first. How that reduced cost base then feeds into the indexation calculation for a specific property is the kind of detail to confirm with a registered tax agent.

How is the indexation factor worked out?

The Act sets out the machinery, even though it publishes the exact multiplier as an image this guide does not reproduce. Three parts of the enacted method are clear:

• Which index. Indexation uses the existing Consumer Price Index numbers under the indexation machinery in the Act (Subdivision 960-M, section 960-275) — the same ABS CPI series already used for CGT indexation. The Act does not create a new index; it reuses this one.
• Which expenditure. New section 110-36(1A) brings the cost-base elements into the calculation for CGT events on or after 1 July 2027, excluding the third element (ownership costs).
• The factor provisions. New section 960-275(1B) sets the indexation factor for expenditure in a cost-base element incurred on or after 1 July 2027 (other than the first element of certain assets), and section 960-275(1C) sets it for the first element of a share or unit. Because the factor keys off the date the expenditure was incurred, it runs forward from that date — it is not frozen at a single base quarter the way the earlier method was.

What the Act does not give in plain text is the exact multiplier. The precise indexation-factor formula — which CPI quarters form the top and bottom of the ratio — is published as a formula image in the legislation, so it is not reproduced or estimated here.

[needs-image-transcription: s960-275 factor formula]

Because that numeric formula is not transcribed, this guide does not give a worked indexation figure for property, and estimating one from the old pre-discount rules or any other regime would not be reliable. Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.

Does the 12-month holding rule still matter?

Yes — and the Act ties indexation to it directly. Under the discount regime that applies for CGT events before 1 July 2027, an asset generally has to be held for at least 12 months before the 50% discount can be used. The enacted 2027 method carries a similar threshold across to indexation: new section 110-36(1A)(b) requires the requirements of Division 114 to be met, and Division 114 (section 114-10(1)) allows you to index cost-base expenditure only where the asset was acquired at least 12 months before the CGT event.

So indexation is available only where the asset was held for at least 12 months before the sale. For an asset held for less than 12 months, the cost base is not indexed at all — the same 12-month line that governed the old discount now governs whether indexation applies.

How does indexation fit with the 30 June 2027 transition?

The reform includes a transition step for assets you already hold. Assets held on 30 June 2027 are treated as sold and reacquired at their market value just before 1 July 2027 — so gains built up before the changeover keep the old treatment, and gains after it fall under the new rules. That market-value rule is the enacted default under the transition provisions (sections 112-155, 112-165 and 112-175). The Act also lets the Minister set an alternative apportioning method by legislative instrument under section 112-185, but as at July 2026 no such instrument has been made, so the market-value default is what currently applies.

The enacted indexation method fits onto that transition cost base in a specific way. The deemed reacquisition market value becomes the first element of the new cost base, and section 960-275(1B) — the factor that indexes expenditure incurred on or after 1 July 2027 — expressly excludes that first element. So further expenditure you incur on the asset after the changeover is indexed under the enacted method, keyed off the date you incur it, while the first element stays fixed at the 30 June 2027 market value.

Because the cost base you index starts from a market value at 30 June 2027, keeping the records that support such a value matters. The ATO’s record-keeping rules for property CGT require records to be kept for the whole period you own a property, plus at least 5 years after you dispose of it (as at July 2026). Missing records generally mean a lower cost base and a larger taxable gain.

Indexation or the 50% discount — how they differ

For events on or after 1 July 2027, indexation is the mechanism for individuals, trusts and partnerships; for events before that date, the 50% discount is. They are different tools: the discount halves the taxable gain after losses, while indexation instead lifts the cost base for inflation before the gain is worked out. As at July 2026, the ATO’s CGT discount settings apply for CGT events before 1 July 2027.

CGT event timing	Mechanism (individuals, trusts, partnerships)
Before 1 July 2027	50% discount may apply if held ≥12 months
On or after 1 July 2027	Discount ends; cost base indexation applies

Which set of rules applies to a sale depends on when the CGT event occurs — for property, that is generally the date the contract of sale is signed, not settlement. This guide states that as a fact about how the law is timed, not as a reason to bring a sale forward or hold it back; that is a decision for you and your adviser. For how a capital gain is built up in the first place, see our guide to how capital gains tax is calculated on property.

How does this apply to a Brix?

The rules above describe how CGT works for a directly held property. A Brix is a different kind of asset — a fractional economic interest in a property, a financial product under the Corporations Act, not ownership of the property itself. Under the MyBrix Product Disclosure Statement current as at July 2026 (version 4.0), each property is divided into 10,000 Brix representing all of its economic benefits, and the owner remains the registered legal owner throughout.

Because it is a different kind of asset, how the 2027 settings — the end of the discount, the return of cost base indexation, the transition step — apply to fractional or indirect interests in residential property is not something you can read across from the general rules. As at July 2026, the ATO has not published guidance, and no registered legislative instrument has been made, that maps the 2027 CGT settings onto fractional interests specifically. This article does not state how the reform applies to a Brix, because there is no published source that does. The Product Disclosure Statement and a registered tax agent are the places to confirm a position for your circumstances.

The short version

Cost base CPI indexation returning on 1 July 2027 is enacted law: for individuals, trusts and partnerships it replaces the 50% discount, and it lifts most of the cost base — but not the third element, ownership costs — for inflation. The enacted method reuses the existing CPI index numbers, keys indexation off when each amount was incurred (so it runs forward rather than freezing at a base quarter), and only indexes assets held for at least 12 months before sale. The one part the Act publishes as a formula image, and this guide does not reproduce, is the exact numeric factor — so no worked multiplier is given here. For how the method applies to your own property, or to a Brix, a registered tax agent is the place to confirm it.