Pre-1985 ASX Shares Are About to Be Taxed: What Long-Term Investors Must Do Before July 2027

ASX Pre-1985 Shares Face New Tax Rules

If you bought ASX shares before 20 September 1985, you have lived through one of Australia’s most generous tax breaks. Any profit you made on those shares was completely free of capital gains tax. That ends on 1 July 2027.

Under the 2026 federal budget, pre-1985 shares lose their full CGT exemption. From that date, the cost base of these shares effectively resets to their market value on 1 July 2027, and every cent of growth after that becomes taxable under the new indexation plus 30% minimum tax regime. This is the biggest change for long-term shareholders in a generation, and most of the people affected do not yet realise it.

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How the 41-Year Loophole Worked, and Why It Is Ending

Capital gains tax was introduced in Australia on 20 September 1985. Anything bought before that date was grandfathered out of the system entirely. Decades of investors have benefited, including original holders of BHP (ASX: BHP), Westpac (ASX: WBC) and ANZ (ASX: ANZ) from before 1985, plus long-held family share portfolios.

The budget changes this in a single move. Shares sold before 1 July 2027 keep the full exemption. Hold them past that date, and the ATO will treat their value on 1 July 2027 as your new cost base. Every dollar of growth after that date is taxable.

Critically, the growth you have already enjoyed remains completely tax-free. The new system only taxes the gains that build up after 1 July 2027. This is not a tax on past gains; it is a tax on every future cent of growth, and that fundamentally changes the case for holding.

The Two Choices Pre-1985 Shareholders Face

You really only have two paths from here.

Option 1: Sell before 30 June 2027. Lock in 41 years of growth completely tax-free. Redeploy the capital into other investments, or back into shares with a fresh, higher cost base.

Option 2: Hold past 1 July 2027. Your 41 years of historical growth stay tax-free, but all future gains from 1 July 2027 onwards are taxed under the new indexation method, with a minimum effective rate of 30% on real gains. Importantly, Age Pensioners and other income support recipients are exempt from this 30% floor and continue to pay tax at their marginal rate. For many retired investors, this carve-out alone could change the maths significantly.

Working out your 1 July 2027 cost base is straightforward for ASX shares. You can use the quoted market price on the day, apply an ATO apportionment formula that estimates the value based on the share’s growth over your holding period, or get a formal valuation. For listed shares, the quoted market price is usually the simplest and cheapest approach.

In our view, holders who do not need the capital and rely on the dividend income may be comfortable holding, especially pensioners exempt from the 30% floor. Investors planning to sell within five to ten years anyway should run the numbers carefully now. The tax-free exit window will not return.

The Hidden Trap Many Will Miss

Many ordinary life events also trigger a CGT event without a sale. Gifting shares to family, transferring them into an SMSF, and certain estate transfers all count. Done before 30 June 2027, these still preserve the exemption. Done after, the reset rule kicks in.

Estate plans built around pre-1985 holdings need a fresh look this year, not next.

The Investor’s Takeaway

The 14-month window is generous in theory but short in practice, especially for large or concentrated holdings.

Three groups should act first: anyone with estate planning involving pre-1985 shares, anyone planning to move holdings into an SMSF, and anyone with concentrated single-stock positions held for decades. Retirees on the Age Pension face a more nuanced calculation given their exemption from the 30% floor.

The change is announced but not yet law, so details will shift during consultation. Even so, this is the rare tax change where doing nothing is itself a decision, and for some long-term holders it will be the most expensive one they ever make.