CGT Reform and Retirees: The Age Pension Exemption That Could Save You Thousands

Buried in the fine print of the 2026-27 CGT reform is a concession with potentially enormous consequences for Australian retirees: recipients of means-tested income support payments most importantly the Age Pension are exempt from the 30% minimum effective tax ratein the year they realise a capital gain. For self-funded retirees who later transition onto the Age Pension, or for part-pensioners selling investment assets, this exemption can save tens of thousands of dollars on a single sale. Yet because the Treasury factsheets describe it in a single sentence, most affected Australians have not heard of it.

This guide explains how the exemption works, who qualifies, how to time a sale to capture it, and where it stops being useful. It assumes you understand the basics of the 2027 reform if not, start with our CGT reform FAQ.

What the exemption actually does

Under the new CGT regime, an investor whose marginal rate would normally produce an effective tax rate below 30% on their capital gain pays the 30% minimum instead. This stops very wealthy investors with little ordinary income from paying near-zero tax on multi-million-dollar gains a perceived loophole the reform is designed to close.

The income-support exemption recognises that retirees, carers and jobseekers are unlikely to be gaming the tax system. Their low income reflects their genuine financial circumstances, not a contrived structure. So the legislation carves them out of the 30% floor entirely.

Who qualifies

The exemption applies to recipients of the following means-tested income support payments in the year of realisation:

• Age Pension (full or part rate)
• JobSeeker Payment
• Disability Support Pension
• Carer Payment
• Parenting Payment (single)

The Commonwealth Seniors Health Card is not an income support payment, so on current Treasury guidance, holding only a CSHC does not qualify you for the exemption. Similarly, the Pension Loans Scheme and rent assistance alone do not qualify.

Receiving the payment for any part of the year is enough

Treasury has confirmed the exemption applies if you receive a qualifying payment at any point during the income year in which you realise the gain. You do not need to be in receipt for the full year. A retiree who reaches Age Pension age in March and sells a property in May of the same financial year qualifies provided their Age Pension claim is granted.

How much it can save

The savings depend on the size of the gain and your other taxable income. Consider Margaret, a 68-year-old part-Age-Pensioner with $25,000 of taxable income (mostly franked dividends and a small annuity). She sells an investment unit she bought in 2010, realising a $400,000 capital gain after CPI indexation.

Margaret's marginal rates on the gain produce an effective rate of approximately 21.6% well below the 30% floor because her other income is so low. The exemption preserves her access to marginal rates and saves her over thirty thousand dollars.

Strategic timing of asset sales

For pre-retirees nearing Age Pension age, timing matters. Three strategies are commonly used:

Strategy 1 Defer until first year on Age Pension

If you are 65 and planning to claim the Age Pension at 67, deferring an investment property sale by two years into your first year of pension receipt qualifies you for the exemption. The cost is two more years of holding (with rental income, capital growth, but also management hassle). For investors with low other income, this can be highly worthwhile.

Strategy 2 Split across multiple years

If you hold multiple assets, selling one in each pension year keeps each year's gain inside marginal-rate territory and preserves the exemption. Selling everything at once may push you above the Age Pension income or assets test and inadvertently disqualify you from receiving the payment.

Strategy 3 Co-ordinate with spouse's pension status

Where one spouse qualifies for Age Pension and the other does not yet, holding the asset in the eligible spouse's name (where possible bearing in mind family law and historical ownership) before sale may produce a much better tax outcome. Transferring assets between spouses is a CGT event itself, so this needs careful planning. Retirees also weighing the sale of the family home alongside their investment portfolio should read our downsizing guide, which covers the downsizer-contribution interaction with the assets test.

The Age Pension assets test cliff

Receiving the Age Pension also means navigating the assets test. For a homeowner couple as at May 2026, the part-pension cuts out at approximately $1,049,500 of assessable assets (excluding the home). Selling an investment property and parking the proceeds in cash or shares converts an asset that was partially shielded (e.g. via an SMSF or a property's depreciation) into a fully assessable asset. This can wipe out the pension entirely.

The interaction with the new CGT regime is therefore subtle: the 30% minimum tax exemption only helps if you are actually on the pension when you sell. If the sale itself pushes you off the pension, the exemption is lost. Practical retirees plan the structure of their sale proceeds often through annuities, lifetime income streams, or downsizer contributions to super to maintain pension eligibility.

Interaction with the broader CGT changes

It is important to distinguish two related-but-separate concessions:

1. CPI indexation applies to every investor for gains accruing after 1 July 2027. Retirees benefit just as everyone else does.
2. The 30% minimum exemption applies only to retirees and other income-support recipients. It removes the floor but does not change the marginal-rate calculation.

A self-funded retiree drawing $80,000 from super (tax-free) is not on the Age Pension and therefore does not qualify for the exemption. Their CGT on a sale is still calculated using CPI indexation, but if their other taxable income is low, the 30% floor may bite. This is one of the strongest planning reasons to consider taking a part-pension once eligible, even at very low rates.

Common mistakes

• Assuming a Health Card is enough. The CSHC is not an income support payment. Only the listed Centrelink payments qualify.
• Selling in the year before pension start. Most expensive timing error the exemption is unavailable, and the proceeds may delay pension eligibility.
• Forgetting capital improvements. Improvements increase the cost base. Many retirees have improvement receipts from 20+ years ago that should be included.
• Not getting the 1 July 2027 valuation. Without one, the ATO apportionment formula will be used, which may overstate pre-2027 gains. For retirees with long-held properties, a formal valuation is usually worth the cost.

This article provides general information about the 2026-27 Federal Budget CGT reform measures announced for commencement on 1 July 2027 and is not financial, tax or legal advice. Tax outcomes depend on individual circumstances. Always consult a registered tax agent, financial adviser or the Australian Taxation Office before acting. Treasury factsheets and the official Budget Papers remain the authoritative source.