Why the CGT changes may have handed this ASX ETF an advantage : Expert

The BetaShares Australia 200 ETF (ASX: A200) has grown to be one of the most popular ASX ETFs available here in Australia.

A new report from Betashares has reinforced that the new capital gains tax (CGT) changes may have handed index ETFs like this one an advantage.

What is changing with the Capital Gains Tax?

Currently, if you own shares for more than 12 months in Australia, you generally get a 50% Capital Gains Tax (CGT) discount.

On 12 May 2026, as part of the 2026-27 Federal Budget, the Government announced it would reform negative gearing and capital gains tax (CGT) arrangements.

These changes will apply from 1 July 2027:

• Limit negative gearing for residential property investments to new builds.
• Replace the 50% CGT discount for individuals, trusts and partnerships with cost base indexation and a 30% minimum tax rate on capital gains.

What does this mean for investors?

In the latest report from Betashares, the ETF provider contends that under the new laws, it could make it more expensive (tax-wise) to own a portfolio of individual shares.

However owning an ASX ETF (like Betashares A200) may become more tax-efficient.

The proposed CGT indexation rules would reduce after-tax returns for investors who hold diversified portfolios of individual shares. 

This is because losses on underperforming stocks cannot fully offset gains on outperforming stocks after adjusting for inflation.

By contrast, investors who hold a single pooled investment, such as an ETF, avoid this issue. This is because gains and losses are effectively netted within the fund, resulting in a lower overall tax burden.

Therefore, index ETFs could theoretically become more tax-efficient than directly holding a portfolio of shares under the new CGT regime.

The case for this ASX ETF

According to Betashares, one way an investor can seek to reduce the CGT indexation tax drag that stems from holding a portfolio of stocks in their own name is to invest in a market-capitalisation index tracking ETF instead.

A pooled managed investment scheme, like a managed fund or an ETF, will invariably have some capital gains that need to be distributed on an ongoing basis. But index ETFs, such as A200, are already very tax efficient at minimising those ongoing tax consequences.

And now they have the additional benefit of being able to effectively offset winners and losers within the ETF. When an investor disposes of an ETF, the capital gain is calculated based on the ETF on-market price they buy and sell at, not at the underlying stock level.

Foolish takeaway

While investors should be aware of the upcoming changes to CGT, taxes are only one part of your overall return.

The quality of your investments, diversification, risk tolerance, and time horizon are often more important.

Your personal circumstances also matter.

The impact of the proposed CGT changes depends on your marginal tax rate, whether you invest personally or through a trust, company, or superannuation fund, and how often you buy and sell investments.

The post Why the CGT changes may have handed this ASX ETF an advantage : Expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.