Australia’s Capital Gains Tax (CGT) rules are set to change from 1 July 2027, and investment property owners need to understand an important part of the transition: when their property’s capital growth occurs.

It is easy to look at an investment property and focus only on the total increase in its value. However, under the proposed changes, the timing of that growth could become an important consideration when determining the eventual tax outcome.

Latitude Accountants CEO John Saade recently explored this issue by building a calculator that compares different property growth scenarios. His analysis shows why two investors with properties that achieve similar overall gains could potentially have different CGT outcomes depending on when those gains occur.

The key lesson is simple:

It is not just how much your property grows. It is when that growth happens.

What Are the 2027 CGT Changes?

From 1 July 2027, the Government is replacing the existing 50% CGT discount for individuals and certain other taxpayers with a cost-base indexation approach. A minimum 30% tax rate will also apply to relevant capital gains. The Government says the new system is intended to tax real gains after taking inflation into account.

The changes are designed to apply prospectively.

This means the treatment of capital growth before and after 1 July 2027 can differ.

For property investors, that makes the transition period particularly important.

Rather than simply asking:

“How much has my property increased in value?”

you may also need to consider:

“When did that increase in value happen?”

Why Does the Timing of Property Growth Matter?

Property prices rarely move in a perfectly straight line.

An investment property might increase substantially in value during one period and then experience relatively little growth for several years.

Alternatively, a property purchased shortly before 2027 might remain relatively flat initially and then experience strong growth afterwards.

These two situations can produce different results under a system that distinguishes between capital growth accruing before and after the transition to the new CGT rules.

John’s calculator demonstrates this by modelling different growth patterns rather than simply looking at the property’s starting and ending values.

This is an important distinction for investors.

Property Growth Is Not Always Linear

Consider two properties:

Property A

• Purchased for $1 million
• Experiences significant growth before 1 July 2027
• Experiences slower growth afterwards
• Eventually sells for $2.5 million

Property B

• Purchased for $1 million
• Experiences limited growth before 1 July 2027
• Experiences substantial growth afterwards
• Eventually sells for $2.5 million

Both properties have increased by $1.5 million.

However, the timing of that $1.5 million increase is different.

That difference is one of the key concepts investors need to understand when considering the 2027 CGT changes.

What Happens to Property Growth Before 1 July 2027?

Under the reforms, the existing 50% CGT discount continues to apply to gains accruing up to 1 July 2027, while indexation applies to gains accruing thereafter.

This means investors who have already experienced significant capital growth before the transition date may need to pay particular attention to how that growth is identified.

For investment property owners, establishing an appropriate value around the transition date can therefore become an important consideration.

This is particularly relevant where:

• The property has increased substantially since purchase
• The property’s value has risen faster than expected
• Renovations have materially increased its value
• The local property market has experienced rapid growth
• Most of the property’s expected growth has already occurred

What If Most of the Growth Happens After 2027?

The opposite situation can produce a different result.

Imagine you purchased an investment property recently for $1.8 million.

By 30 June 2027, it may only be worth around $1.9 million.

However, suppose you eventually sell the property for $3 million.

In this scenario, relatively little of the property’s overall growth occurred before the transition date, while a much larger portion occurred afterwards.

This can make the decision to obtain a formal valuation less compelling, depending on the final numbers and applicable rules.

John’s calculator demonstrates why investors should not automatically assume that every property needs a valuation.

The potential benefit depends on the property’s individual growth curve.

What If Your Property Has Experienced Very Strong Growth?

Now consider the reverse.

Suppose an investor:

• Purchased a property for $1 million
• Sees the property’s value increase to approximately $2 million by 2027
• Eventually sells it for $2.5 million

In this example, a large portion of the property’s total growth occurred before the transition date.

According to the scenario explored by John, the difference between using a formal valuation and the alternative apportionment method could be substantial.

This is the type of situation where understanding the property’s market value around the transition date may be particularly important.

The reason is that the investor does not simply want to know the property’s eventual sale price.

They need to understand how much of the overall gain relates to each period.

How Do Renovations Affect the Growth Picture?

Renovations can also change the property’s value significantly.

For example, an investor may purchase an older property and later:

• Renovate the kitchen
• Upgrade bathrooms
• Add an extension
• Improve outdoor areas
• Add additional accommodation
• Make other substantial improvements

If the property’s value increases significantly following those improvements, the investor’s growth history may look very different from someone who purchased a comparable property in an already renovated condition.

Keeping detailed records of capital improvements and related costs is therefore important for maintaining an accurate picture of the property’s cost base.

Investors should also consider whether independent valuation evidence may be appropriate based on their circumstances.

What Is the Difference Between a Valuation and the Proposed Formula?

For certain assets without a readily ascertainable market value, the Government has also released a proposed method for apportioning capital gains and losses between the relevant periods. Treasury’s August 2026 consultation materials include a draft legislative instrument covering real property and other assets without a readily ascertainable market value.

For property investors, this creates two concepts to understand:

Formal market valuation

A qualified valuer determines the property’s market value at the relevant date.

Apportionment method

The applicable formula is used to allocate the capital gain between the relevant periods.

The appropriate approach will depend on the legislation, the property and the investor’s circumstances.

The important point is that the two approaches can produce different results where actual property growth has not followed a smooth pattern.

Why Two Similar Investors Could Have Different Tax Outcomes

Property investors sometimes assume that owning similar properties means they will face similar tax outcomes.

That is not necessarily the case.

Consider two investors who each own a property worth $2 million when eventually sold.

One investor purchased several years earlier and experienced strong growth before 1 July 2027.

The other purchased more recently and experienced most of their growth after 2027.

Their final sale prices may be similar, but the timing of their capital growth is different.

Other factors can also affect the outcome, including:

• Purchase date
• Purchase price
• Cost base
• Ownership structure
• Renovation expenditure
• Future sale price
• Inflation
• Holding period
• Applicable tax rates

This is why a simple property growth percentage cannot tell you the complete CGT story.

Should You Get Your Investment Property Valued?

There is no universal answer.

A formal valuation may be worth considering where a property has experienced significant growth before 1 July 2027 and the potential difference in tax treatment is large enough to justify the valuation cost.

It may be less compelling where:

• The property has experienced little growth
• The property was purchased recently
• Most expected growth will occur after 2027
• The difference between the potential approaches is relatively small

John’s calculator demonstrates that even a valuation costing several hundred dollars needs to be assessed against the potential tax difference.

The right question is not simply:

“How much does a valuation cost?”

It is:

“Could the valuation change my eventual tax position by more than it costs?”

What Should Property Investors Do Before 2027?

Investors do not need to wait until the transition date to start preparing.

Consider reviewing:

1. Your property’s current market value
2. Your original purchase price
3. Your property’s cost base
4. Capital improvements and renovation costs
5. Comparable sales in your area
6. How much growth has already occurred
7. Your expected future sale price
8. Whether a formal valuation could be worthwhile

You can also discuss different growth scenarios with your accountant.

For example, what happens if your property grows by 1%, 2%, 3% or more each year after 2027?

Changing these assumptions can materially alter the potential outcome.

Is 30 June 2027 a Deadline to Get a Valuation?

The transition date is important, but investors should distinguish between the relevant valuation date and the physical date on which a valuation report is obtained.

John’s discussion also highlights the possibility of retrospective valuations in appropriate circumstances.

However, investors should not assume that a retrospective valuation will automatically be accepted for every purpose.

The appropriate evidence and valuation requirements should be confirmed with a qualified tax professional and independent valuer.

With the reforms continuing to be implemented, staying informed about the final rules will also be important. Treasury has indicated that further legislation and implementation work is continuing.

The Main Takeaway for Property Investors

The 2027 CGT changes are not simply about how much your investment property increases in value.

They are also about when that increase occurs.

A property that experiences strong growth before 1 July 2027 may need to be considered differently from one that experiences most of its growth afterwards.

That is why property investors should look beyond today’s property value and consider the property’s entire growth curve.

Understanding that growth pattern, reviewing your cost base and modelling different scenarios can help you have a more informed discussion with your accountant about whether a formal valuation is appropriate.

Frequently Asked Questions About the 2027 CGT Changes and Property Growth

What are the 2027 CGT changes in Australia?

From 1 July 2027, the Government is replacing the existing 50% CGT discount with cost-base indexation for relevant taxpayers and introducing a 30% minimum tax rate on relevant capital gains. The reforms are intended to apply to gains accruing from 1 July 2027.

Why does property growth before 2027 matter?

The reforms distinguish between gains accruing before and after 1 July 2027. If a property has experienced significant growth before the transition, determining the value and allocation of that growth can therefore be important.

Does every investment property need a valuation?

No. Whether a valuation is worthwhile depends on the property’s circumstances, growth history and potential tax difference between the available methods.

What if my property grows mostly after 2027?

If most of the property’s growth occurs after the transition date, the potential benefit of establishing a higher transition-date value may be smaller. The numbers should be modelled based on your circumstances.

Can renovations affect my CGT position?

Renovations and capital improvements can affect your property’s cost base and may also influence its market value. Keeping accurate records of eligible costs is important.

Should I speak to an accountant before getting a valuation?

Yes. Before spending money on a formal valuation, it can be useful to discuss your circumstances with a tax professional and determine whether the potential tax benefit justifies the cost.

Talk to Latitude Accountants About the 2027 CGT Changes

The 2027 CGT reforms could make the timing of your investment property’s growth an important consideration.

If you own an investment property and are unsure how the changes could affect your future CGT position, Latitude Accountants can help you understand the relevant tax considerations and assess your options.

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📧 info@latitudeaccountants.com.au

Disclaimer

This article provides general information only and does not constitute financial, legal, tax, property or business advice. The 2027 CGT reforms discussed are based on government legislation and materials available at the time of writing and may be subject to further amendments, regulations or implementation details. Your tax position will depend on your individual circumstances. Speak with a qualified tax professional before making decisions regarding your investment property, valuation or CGT position.