The Shape of the Gain
On 1 July 2027 the law treats assets held by an individual or a trust as sold and bought back at market value. For an asset with no quoted price that day, Treasury has proposed a formula, still in draft, that draws a line from the price paid to the price eventually received and reads the value off it. Real prices do not move in lines. This page measures how far the two can sit apart. Across one market's past, it counts how often the line missed, and which way. Listed shares stand in, because a share's real price on any past day is known.
The date
One date, every asset
The core changes are law, assented to in June 2026. For an asset held on 30 June 2027 by an individual or a trust, the law treats it as sold just before 1 July 2027 and bought back immediately after, at its market value on that day.
Nothing is paid on the date. The gain up to the date keeps its existing treatment, including the 50% discount, and is brought to account only when the asset is actually sold. The gain after the date is taxed under the new rules: the cost is adjusted for inflation, there is no discount, and for individuals a minimum rate of 30% applies to that part.
The whole question, then, is what the asset was worth on the date.
The split
The value on that date splits the gain
Picture the whole gain as one strip. The value on the date is a cut across it. Everything left of the cut is taxed under the old rules. Everything right of it is taxed under the new.
Move the cut and the two portions change size. A higher value on the date puts more of the gain under the old rules. A lower value puts more of it under the new.
The line
For some assets, there is no price that day
A house, a private company, a painting: none of these has a quoted price on 30 June 2027. The law's default is a market valuation. As an alternative, Treasury has released a draft formula that an owner could elect to use instead, for real property and for any other asset without a ready price that day. It is a draft. Treasury consulted on it in August 2026, and it is not yet law.
The draft formula does not look for the value. It assumes it. It takes the price paid and the price eventually received, assumes the asset grew at one constant compounding rate every day in between, and reads off what that rate implies for the date.
This is often described as a straight line. It is a straight line only in one sense: constant percentage growth. On an ordinary price chart, constant percentage growth curves upward. On a chart whose vertical axis is logarithmic, where each step up is the same percentage rather than the same dollar amount, it is exactly a straight line from the first point to the last. This page uses that chart, so that "the line" is straight.
The real price
Real prices do not move in lines
Here is a real history over the same two points: an Australian listed company, its observed daily closing prices, fifteen years. The line is the value Treasury's draft formula would assign to the company on the date. The dot is the observed price that day.
One point needs stating plainly. Listed shares would not use this formula. Their market value is readily ascertainable on any day, so the draft does not cover them. This page borrows their prices for one reason: for a share, the real value on any past date is known, and for a house or a private company it is not. Shares make it possible to measure a miss that, for the assets the formula is written for, no one could measure. Everything that follows is an illustration by analogy, not a case study of any shareholding.
Listed shares would not use this formula. Their price is known every day. That is exactly why they can test it.
The shape
The shape decides which way the line misses
The line is drawn the same way in every case, from the first price to the last, by the draft method. What changes is the history underneath it.
Steady growth
For a history like this, the line and the observed price sit close at the date. The draft formula's value is near the mark.
Early growth, then a plateau
Most of the growth is behind the asset by the date. The observed price sits above the line. The formula would place more of the gain after the date than actually occurred there.
Late surge
Most of the growth arrives after the date. The observed price sits below the line. The formula would place more of the gain before the date than actually occurred there.
Boom, then bust
Where the observed price sits depends on where the date falls. Move the date a few years and the miss changes sign. That is why the date on the instrument below can be dragged.
The tax
What the miss does to the tax
The same gain, read two ways, is taxed two ways, and the miss can run in either direction. Two real holdings show both.
Take one real history and one date. Read the value on the date two ways: as the observed price, and as the line Treasury's draft formula draws. Each reading splits the same gain differently between the old rules and the new.
Under the old rules, half the gain is taxed at the marginal rate. Under the new rules, the cost is lifted by inflation and the gain above that is taxed in full, with a floor of 30% for individuals. A dollar of gain moved across the date changes its tax; the side of the line decides which way.
Woolworths sat 22% above the line on 30 June 2011. The formula works against the holder: electing it would cost $9,257. Commonwealth Bank sat 14% below the line on 29 December 2017. The formula favours the holder: electing it would save $10,059. The miss runs both ways; for the assets it covers, the draft makes the reading the holder's election.
Woolworths · bought 1 July 2005 · sold 30 June 2020 · the date set at 30 June 2011 · $100,000 invested · 47% marginal rate
The line puts $30,474 of the gain after the date instead of before it, and the tax on that gain rises by $9,257.
General information only, not professional advice. Prices are observed closes. The line and the tax are modelled under stated assumptions and are not a promise of any outcome.
The cap
A large miss is not a large bill
A miss moves the tax by a fixed few cents for each dollar the line puts on the wrong side of the date, and only between the price paid and the price received. Past either end, the miss stops counting.
At 47%, each misplaced dollar moves 30.4 cents of tax, 23.5 from the discount forgone and 6.9 from the inflation adjustment. Woolworths' miss of $30,474 comes to $9,257 more tax under the formula.
- illustrativeThe sum per dollarEach misplaced dollar moves 30.4 cents of tax at 47%, so Woolworths' miss of $30,474 came to $9,257.
- illustrativeThe capAbove the price received a larger miss adds no more tax; below the price paid only the inflation adjustment still counts, a few cents a dollar.
- observedTwo examplesDomino's, 363% above the line, owed 28% more under the formula; Pro Medicus, 96% below it, under 3% less.
The size of the miss and the size of the tax effect are different things.
The sum stops at the two prices. Once the value on the date is above the price eventually received, the after-date portion is a loss, and a loss cancels part of the gain before it, so a larger miss adds no more tax. Below the price paid the before-date portion is the loss, and the same happens in reverse.
A lower rate does not soften the slope in step. At 0% the discount is worth nothing, but the 30% floor for individuals still taxes whatever the line moves past the date: 30 cents a dollar before inflation, against 23.5 at 47%. The slope is steepest at 0% and gentlest at 30%, where the floor and the rate meet.
- At 0%: 34.4 cents a dollar, 30 from the 30% floor and 4.4 from the inflation adjustment; Woolworths' miss comes to $10,480 more tax under the formula.
- At 18%: 25.4 cents a dollar, 21 from the 30% floor net of the discount and 4.4 from the inflation adjustment; Woolworths' miss comes to $7,737 more tax under the formula.
- At 32%: 20.7 cents a dollar, 16 from the discount forgone and 4.7 from the inflation adjustment; Woolworths' miss comes to $6,303 more tax under the formula.
- At 39%: 25.2 cents a dollar, 19.5 from the discount forgone and 5.7 from the inflation adjustment; Woolworths' miss comes to $7,681 more tax under the formula.
- At 47%: 30.4 cents a dollar, 23.5 from the discount forgone and 6.9 from the inflation adjustment; Woolworths' miss comes to $9,257 more tax under the formula.
A dollar of gain that the line moves from before the date to after it loses half its discount, which at 47% is 23.5 cents of tax, and picks up the inflation adjustment, worth another 6.9 cents in the Woolworths window: 30.4 cents in all. Woolworths' miss was $30,474, so the difference was $9,257. A miss the other way runs the same sum backwards, and the tax falls instead.
Domino's, at the midpoint of a 2010 to 2025 window, sat 363% above the line and above its eventual sale price, so the after-date portion was a loss, cancelling part of the gain before it: $17,171 more tax under the formula, on $62,266 at market value. Pro Medicus on 28 June 2013, in a 2005 to 2025 window, sat 96% below the line and below the price paid, so the before-date portion was the loss: $370,782 less, on $13.9 million.
Just under the price received the profile steps down. There the sale price sits inside the inflation adjustment on the value at the date, so the after-date portion is neither a gain nor a loss, and only the discounted half of the gain moves with the value.
Before the instrument
Why this page uses the past
1 July 2027 has not arrived. No asset has a price for it yet, and the draft formula cannot be applied to any holding until that holding is sold. To show the mechanism honestly, the page needs three known points: a purchase, a date and a sale. Only the past provides all three.
The instrument below therefore offers a real company, a real holding period and a real date inside it, and treats that date as if it were 1 July 2027. The prices are observed. The line is computed by the draft method. The tax is a simplified model. Every figure says which of the three it is.
- bought: known
- the date: known, because it has passed
- sold: known
The instrument
Now, the instrument
Step 1 of 4
The record
Commonwealth Bank, 1 July 2010 to 30 June 2025: observed daily closes, adjusted for share splits but not for dividends, scaled to $100,000 invested on the first day. The vertical axis is logarithmic; a switch beneath the stage redraws the same record in ordinary dollars.
- observedMarket value
- the law's default, the asset's real value on the date; for a share, the observed close.
- formulaDraft formula
- Treasury's proposed alternative, a value read off the line from the price paid to the price received.
Market value is the law's default. Treasury's draft formula would be a choice, offered for real property and for any asset with no ready price on the day. A holder who can show a market value would compare the two readings and keep the cheaper one. Where a valuation cannot be had, or would cost more than it saves, the formula is the only reading. The slip says which way the choice runs at this date.
General information only, not professional advice. Prices are observed closes. The line and the tax are modelled under stated assumptions and are not a promise of any outcome.
The random walk
The line is the middle path
This is what chance alone would do to the line. A random walk pinned at both ends lands above the line as often as below, and seldom near it. The line is right in the middle and wrong on average.
- above the line
- 50.1%
- of paths, on the date
- median miss
- +0.1%
- the middle path, as a share of the line
- mean miss
- +12.4%
- on average, as a share of the line
- typical miss
- $67,670
- either way, on average, per $100,000
- tax effect
- +0.6%
- of the tax at market value, on average · the formula reading owes more
illustrativethe formula reading owes less on 46.5% of paths, more on 31.1%, and the same on 22.4%, the paths that end in a loss and pay no tax either way
illustrativeThe biggest misses sit past the sale price, where the netting rules cap them: 14% of paths carry 93% of the mean miss. Netting absorbs 92% of the tax the mean miss would cost on a random walk, and 60% on real histories.
The plainest model of a price is a random walk. Each day the value moves by a random percentage, up or down, with no memory of the day before: no news, no cycle, no crash. What Treasury's draft formula does to such a walk is what it does when nothing but chance is at work.
Pin the walk at the two prices and ask where it stood on a date between. The line is the median of every path through those points: right half the time, wrong by a lot the other half. What the market adds is trend: early growth that kept compounding, the one shape the cap never touches.
| setting | above the line | typical miss | tax effect |
|---|---|---|---|
| the base case: date at the midpoint, 8% drift, fifteen years | 50.1% | $67,670 | +0.6% |
| the date at 80% of the window | 50.0% | $78,680 | −3.4% |
| the date at 20% of the window | 50.1% | $38,377 | +1.4% |
| no drift | 50.0% | $37,092 | −5.9% |
| five years, not fifteen | 50.1% | $26,859 | −0.8% |
400,000 simulated paths per row, at 25% volatility a year. The tax effect is the formula reading's tax less the market reading's, as a share of the tax at market value; a negative figure means the formula reading owes less on average. Illustrative.
- illustrativeright in the middle, wrong on averagePinned to its two ends, a random walk sits above the line by 12% of the line's value on average, because a doubling is a bigger number than a halving.
- illustrativethe bias growsThe bias grows with the volatility squared and with the years held: an average miss of 4%, 12% and 35% at 15%, 25% and 40% volatility over fifteen years.
- illustrativethe tax notices lessThe tax moves only +0.6%, because the biggest misses sit past the sale price, where netting caps them, and real histories escape that cap far more often than chance does.
The base case: 400,000 simulated paths at 25% volatility a year, fifteen years held with the date at the midpoint, per $100,000 at 47%. Illustrative.
Across the market
Not eight histories, but all of them
Across 1,129 company-dates, the observed value sat a median 13.5% above the line Treasury's draft formula draws, and one reading in seven came within 10% of it. The middle case is a wash; on average the formula costs 9% more.
- company-dates
- 1,129
- each a company read at one 30 June · 422 overall losses set aside
- median miss
- +13.5%
- the observed value against the line, middle case
- typical miss
- 70%
- the distance either way, on average
- mean tax difference
- +$22,078
- more tax under the formula, per $100,000 at 47% · the middle case −$195 · less tax under the formula in 51% of cases
- observedwhich side of the lineThe observed value sat above the line in 59% of company-dates, below it in 40% and near it in 2%.
- illustrativeeven by count, not by dollarsBy count the sides are even, 552 against and 575 in favour, but the unfavourable cases cost $57,162 on average, five times the $11,526 the favourable ones save.
- illustrativethe heaviest 5% of cases91% of the mean sits in 56 cases where early growth kept compounding, the shape that cost a CSL holding $313,139 at one reading; without them the mean is +$2,004.
- observedthe date decidesAt 30 June 2008, 68% of companies sat above the line; at 30 June 2012, 78% sat below it, and where 2027 falls in the cycle is not yet known.
Every 30 June from 2005 to 2021, five years held either side of it: 1,129 company-dates that ended in a gain, per $100,000 at 47%.
The middle company-date pays about the same either way, a median difference of −$195. The typical difference, one way or the other, is $8,070, and only one case in nine is within $1,000. The mean is +$22,078, 9% more tax under the formula than at market value.
Above the line, the formula puts the value too low and moves gain from the discounted side of the date to the fully taxed side, a few cents on every misplaced dollar. In the 301 cases the cap never reached, that came to $75,280 on average. If every holder used the formula, the revenue would rise. No holder has to.
The gain before the date is never adjusted for inflation; it keeps the 50% discount instead. Only a gain after the date is measured against the value lifted by CPI, and a loss after the date against the value as it was. Once the observed value passes the sale price, or comes within inflation of it, the market reading is discounted but never adjusted; the formula's lower value is. Hence 153 of 665 cases above the line favoured the formula.
QBE Insurance, bought 2 July 2001, read at 30 June 2006, sold 30 June 2011, per $100,000 at 47%. The observed value was $179,825, 46% above a line at $123,004; the sale, at $151,316, was below the observed value. The tax at market value was $12,059; under the formula, $10,311. The inflation adjustment on the formula's value, $8,402, outweighed the $6,653 of discount forgone. Such cases are small: grown 1.2 times in ten years, median tax $5,146, median saving $1,740.
Each of the 197 companies in the data package is bought on 1 July, read at the 30 June five years on, and sold five years after that. Every 30 June from 2005 to 2021 is taken in turn, and every company whose record covers the whole window is counted: 1,129 company-dates ended in a gain, and 422 ended in a loss and are set aside. Every figure is per $100,000 at 47%, under the instrument's simplified model.
It is not a sample of the assets the draft formula covers; listed shares stand in because their prices are known. It is survivors only: the 197 companies are those listed today, so any company that failed or was taken over is absent. And the holding periods are set by design, not drawn from how long people hold.
how far the observed value sat from the line on the date, as a share of the line's value ● ◇
log scale: a halving and a doubling sit the same distance from zero
The same design at four dates
Five years held either side of the date, except 30 June 2020, read with three years after it.
Who chooses
The miss is a one-way option
If Treasury's draft is made as it stands, the formula would be a choice, not a default, so the miss is not a risk the holder carries. It is an option the holder owns, and its price is a valuation.
A holder who can show a market value on the date can work the tax both ways and keep the cheaper reading: the formula where it helps, a valuation where it hurts.
Woolworths Group · bought 01 JUL 2005 · sold 30 JUN 2020 · the date 30 JUN 2011
The holder keeps the market-value reading and saves $9,257. The price is a valuation on the date.
$27,948 − $5,870 = $22,078: the cost a valuation avoids, less the value of the choice, is the mean tax difference.
The value of the choice is the saving in the favourable cases spread over all cases, not an average saving, and it assumes a valuation every time. The largest reading, $31,008, rests on 27 company-dates. Under the simplified model; illustrative.
- illustrativethe value of the choice$5,870 is not what the formula saves but what the choice is worth: the saving in the 575 favourable cases spread over all 1,129, given a valuation every time.
- illustrativethe revenueFor holders who can show a market value, the formula can only lower the revenue; for everyone else it is the default in practice, and the mean of +$22,078 stands.
In tax terms the miss is a bet the holder does not have to take. The price of not taking it is evidence of value on the day.
Because the line runs to the eventual sale, the value it gives 30 June 2027 depends on a price that does not yet exist, and two identical parcels sold in different years get different values for the same day. Commonwealth Bank shares bought for $100,000 on 1 July 2010 were worth $174,447 on 30 June 2017; the formula gives that day $130,479 if they are sold on 30 June 2020 and $188,549 if sold on 30 June 2025.
Which turns the question around: not what the formula says an asset was worth, but what evidence of its value a holder could bring on the day it matters.
Worth asking
None of this is a reason to commission anything. It is a reason to ask.
- Which assets would the deemed sale touch, and what shape has each one's history taken so far?
- If the draft formula is made, would its single-rate assumption match how the asset actually grew, or miss it?
- Which reading would favour the holder of this asset, and what evidence of its value on the day could be shown?
- Is this a conversation to have with an adviser, and when?
What it would take
The shape of the risk, not its size
This page shows what Treasury's draft formula does to the tax when its line misses, and how the miss ran across one market's past. It cannot say how large the effect would be for the assets the draft covers.
What this page cannot show
This page leaves out nine things, each a reason its figures are an illustration, not an estimate.
Eight histories were chosen for contrast, not drawn at random.
The featured companies were picked because each shows a different shape. They say what can happen, not what usually does. The population figures are the corrective: every company in the package, with the date and the holding period fixed by design rather than chosen.
The holding periods and dates in the worked cases were set by hand.
Each worked case uses a window and a date chosen to make its point plainly, and the instrument lets the reader move all three. Nothing on this page knows how long real holdings last or when they were bought, so the population figures use a few fixed designs rather than the real mix.
The companies are today's survivors.
The price package holds 197 companies, those listed at 2 September 2026. A company that failed, was taken over or was delisted before then is not in it, so every history here leans towards the ones that ended well, and the population figures inherit that lean.
A share price does not move like a house or a private company.
Listed shares carry daily noise, deep liquidity, momentum and mean reversion. A house or a private company is valued in steps, by appraisal and by occasional sale, and tends to run in long trends with sudden breaks. The formula's miss for those assets could be larger or smaller than anything measured here, and this page cannot say which.
The prices are prices, not total returns.
Dividends are not added back. That is the right basis for a capital gain, and it understates what an investor received. A company that paid out most of its earnings looks flatter here than its owner's experience of it, and its line is drawn from that flatter history.
The tax model is a sketch of the rules, not the rules.
There are no acquisition or disposal costs, no other gains or losses in the same year, no income-support exemptions or housing choices, and the 30% minimum for individuals is a simple floor on the after-date portion. Companies, superannuation funds and foreign residents are outside the model altogether. Every figure is illustrative, not anyone's tax position.
A holding bought within a year of the date is never shown.
The date can sit only where both portions are at least a year long, so the twelve-month rules for the discount and for indexation are always met. Under the law, a holding bought between July 2026 and June 2027 would carry no discount on its before-date portion at all. That common case is outside the instrument.
Demergers are marked, not adjusted.
When a company hands part of itself to shareholders as a new listing, its price steps down and the record keeps the step. Three large demergers are marked on the instrument; smaller capital returns are not. A window that spans one shows a fall that no shareholder suffered.
The index and the price build were checked, not audited.
The Consumer Price Index series was taken from the Reserve Bank of Australia's table G1, which carries the ABS series, rescaled to the 2011-12 reference period and checked against two anchor quarters. The script that built the price package lives outside this site's repository, so the build cannot be re-run from what is published here.
What a real study would need
Eight steps, from the cheapest to the hardest, would turn this illustration into an estimate, each replacing an assumption with a measurement.
the cheapest step
A universe without survivorship.
Historical constituent lists that include the names since delisted, or every company ever listed, in place of today's survivors. This is the cheapest correction and the first a reviewer would ask for. It would show whether the lean towards good endings has flattered the line or hurt it.
Holding periods from tax statistics, not fixed designs.
The real distribution of how long assets are held and when they were bought, taken from tax statistics, in place of five years each side of the date. The formula's behaviour depends on where the date falls in the holding, so the mix of holdings decides the aggregate.
Price series for the assets the draft actually covers.
Repeat-sales house price indices, valuer-general records and private company transaction multiples, each with its own volatility and autocorrelation. The draft formula is written for these assets, not for shares. Their series are sparser and smoother, and the miss would need measuring on them directly.
A calibrated simulation with confidence intervals.
A random-walk model tuned to each asset class, with drift, volatility and autocorrelation measured from its own series, and intervals found by resampling over dates and companies. The random walk on this page uses a handful of settings and reports no intervals. It shows what the formula assumes, not what any asset class does.
The election and the cost of a valuation, modelled together.
The draft formula would be a choice, not a default. A holder who can compare the two readings takes the formula only when it helps, and pays for a valuation when it does not. A revenue estimate needs both the take-up and the fee, because together they decide how much of the miss ever reaches an assessment.
Sensitivity to where the date falls in the cycle.
On this page one 30 June sits at a peak and another in a trough, and the side of the line most holdings sit on flips between them. A study would run the date across the cycle and report a range rather than a number, because where 1 July 2027 will fall in the cycle is not known.
The interaction with other gains and losses in the year.
The tax on the split depends on what else is sold in the same year, because losses net against gains before any discount. This page models one asset on its own. A study would model the whole year's position, where the same miss can cost more, less or nothing.
The exact mechanics of Division 119, the new rules.
The 30% minimum for individuals, the loss-ordering rules, the income-support exemptions and the new-dwelling and affordable-housing choices, applied as the law states them rather than as this page simplifies them. The differences are small for most holdings; below a 30% marginal rate, where the floor bites, they are not.
the hardest step
This page shows the shape of the risk. A study of that kind would show its size.
What this page is
An illustration by analogy. It applies the draft formula's method to listed share histories, which the draft would not cover, because for shares the real value on any past date is known and the miss can be measured. The formula is a draft, and if made it would be a choice, not a requirement. Market value is the law's default.
What the numbers are
Prices are observed daily closes from ASX end-of-day records, adjusted for share splits and consolidations but not for dividends. The 197 companies were all still listed at 2 September 2026, so any that failed or were taken over before then are absent. Each record has its own first and last date, shown on the instrument. The line is computed from the first and last close by the draft method. The tax is a simplified model for a resident individual at a chosen marginal rate, per $100,000 invested. It is not anyone's tax position.
What is not modelled
Costs of buying and selling, other gains and losses in the same year, companies, superannuation funds and foreign residents, among other things. The full list is in the assumptions drawer, and the cards under "What it would take" say what each omission does to the numbers.
Status
The core changes are law: the Acts received assent on 26 June 2026. The formula is not. Treasury released it as a draft on 4 August 2026 and took submissions until 21 August 2026; as at the date below, it had not been made. Two further exposure drafts have since been released, on 3 September 2026 for a minimum tax on discretionary trusts and on 11 September 2026 for a start-up concession; neither changes the formula. The Opposition has said it would repeal the changes if elected. Check the current status before relying on any of this.
Sources
The exposure draft determination and its explanatory material (Treasury consultation c2026-792170); the ABS Consumer Price Index (6401.0, All groups, Australia); ASX end-of-day price records, as described in the assumptions.
Not advice
Nothing on this page is tax, legal or financial advice, and nothing on it is a valuation. Speak to your adviser before acting.