Capital Gains Tax (CGT) is already an important consideration for Australian property investors. From deciding when to sell an investment property to understanding the property’s cost base, tax planning can significantly affect the amount of tax ultimately payable.

Now, proposed changes to Australia’s CGT system are giving property investors another reason to review their long-term strategy.

From 1 July 2027, the Australian Government plans to replace the current 50% CGT discount with an inflation-based approach for relevant capital gains, alongside a minimum 30% tax rate on real capital gains. The new arrangements are intended to apply to capital gains that accrue from 1 July 2027 when they are realised.

In this episode of The CEO Breakdown, Latitude Accountants CEO John Saade discussed what these changes could mean for property investors, particularly the importance of understanding property values and the timing of future capital gains.

For investors with significant property portfolios, the key message is simple: do not wait until you sell to think about CGT.

What Is Changing With Capital Gains Tax From 1 July 2027?

Under the current system, individuals and certain other taxpayers can generally access a 50% CGT discount when an eligible asset has been held for more than 12 months.

The proposed changes would move away from this flat discount towards an inflation-based approach.

According to Treasury, from 1 July 2027:

• The existing 50% CGT discount will be replaced by a discount based on inflation.
• The cost base of relevant assets will be indexed to account for inflation.
• A minimum 30% tax rate will apply to real capital gains.
• The changes will apply to capital gains that accrue from 1 July 2027 when they are realised.
• Capital gains that accrued before 1 July 2027 retain access to the existing 50% discount.

The objective is to ensure investors are primarily taxed on real gains rather than gains that simply reflect inflation.

For property investors, however, the practical question is more complicated: how do you determine how much of your property’s future gain occurred before or after the change?

Why 30 June 2027 Could Be Important for Property Investors

One of the most important issues for investors to consider is the value of an existing property around the transition date.

John Saade’s discussion highlights the potential importance of establishing an appropriate valuation around 30 June 2027.

Consider an investment property purchased several years ago. If the property continues to appreciate after 1 July 2027, an investor may need to distinguish between the capital growth that occurred before the new rules and growth occurring afterwards.

This makes contemporaneous evidence of the property’s value potentially important.

Depending on the final legislation and how the rules apply to a particular asset, investors may need to consider evidence such as:

• Independent property valuations
• Comparable sales
• Property market reports
• Purchase and improvement records
• Existing valuation documentation
• Records showing the property’s condition and characteristics at the relevant date

The exact treatment will depend on the legislation and the investor’s circumstances. The important point is that property investors should not assume that their historical purchase price will tell the whole story under the new system.

How Could the Changes Affect an Investment Property?

Imagine an investor purchased a property for $700,000 several years ago.

By 30 June 2027, the property is worth $1 million. If the property is eventually sold for $1.3 million, there has been substantial growth over the entire ownership period.

Under the proposed transition arrangements, understanding when that growth occurred becomes important.

The investor’s tax position may therefore depend on more than simply calculating:

Sale price − original purchase price = capital gain

The transition rules are designed to distinguish gains accruing before and after 1 July 2027.

This is why investors should start organising their records and discussing their circumstances with their accountant well before the transition date.

Does This Mean Property Investors Should Sell Before July 2027?

Not necessarily.

A major tax change does not automatically mean that selling an investment property before the change will produce a better financial outcome.

Selling a property can create other costs and consequences, including:

• CGT payable on the existing gain
• Selling and agent costs
• Legal and conveyancing costs
• Potential borrowing and refinancing considerations
• Loss of rental income
• Future capital growth opportunities
• The cost of acquiring another investment
• Potential changes to an investor’s overall asset allocation

The decision to sell should therefore be based on the investor’s overall financial position and investment strategy, not simply the headline CGT rate.

A property that remains a strong long-term investment may still make sense to hold.

What Should Property Investors Do Before 1 July 2027?

The transition allows investors to review their property portfolios and improve their record-keeping.

Review Your Property Portfolio

Start by identifying:

• Which properties you own
• When each property was acquired
• The original purchase price
• Capital improvements made
• Current estimated values
• Existing loans and associated costs
• Rental income and expenses
• Potential future sale dates

This creates a clearer picture of where your portfolio stands before the new rules take effect.

Understand Your Property’s Cost Base

Your property’s cost base can include more than the original purchase price.

Depending on the circumstances, relevant costs may include certain acquisition costs, ownership costs and capital improvements.

Keeping accurate records can help establish the property’s tax position when it is eventually sold.

Consider a Professional Valuation

For properties that could be significantly affected by the transition rules, obtaining appropriate valuation evidence may become an important part of tax planning.

Investors should discuss the timing and methodology of any valuation with their accountant and an appropriately qualified valuer.

Review Your Long-Term Strategy

Rather than asking only “Should I sell before 1 July 2027?”, consider broader questions:

• Is the property generating an acceptable rental yield?
• Does the property still fit your investment objectives?
• Are you comfortable with the level of debt?
• What is the expected long-term capital growth?
• Would another investment provide a better return?
• What would selling and reinvesting actually cost?

Tax should be an important part of the decision — but it should not necessarily be the only factor.

What About Existing Investment Properties?

The proposed changes are particularly relevant to people who already own investment properties.

Treasury has stated that capital gains accruing before 1 July 2027 will retain access to the existing 50% discount, while gains accruing from 1 July 2027 will be subject to the new inflation-based approach and minimum tax rate.

This means the changes are not simply a case of “all existing properties lose the 50% discount from 1 July 2027.”

The treatment of an existing asset involves understanding the capital growth that occurs across the transition period.

That makes accurate records, appropriate valuations and professional tax advice particularly important for investors approaching the change.

Why Tax Planning Matters Before the Change

CGT planning should ideally happen before a property is sold.

For example, an investor may have several properties with different:

• Acquisition dates
• Capital growth rates
• Rental yields
• Debt levels
• Ownership structures
• Future investment objectives

Selling one property rather than another could produce very different tax and cash-flow outcomes.

A proactive accountant can help an investor model different scenarios and understand the potential consequences before making an irreversible decision.

This is consistent with Latitude Accountants’ broader approach of being proactive all year round, rather than only becoming involved when a tax return is due.

Frequently Asked Questions About the 2027 CGT Changes

When do the new CGT changes start?

The proposed new CGT arrangements are scheduled to apply from 1 July 2027. Treasury states that the new arrangements will apply to capital gains accruing from that date when they are realised.

Will the 50% CGT discount disappear completely?

The proposed reforms would replace the existing 50% CGT discount with an inflation-based approach for relevant capital gains, alongside a minimum 30% tax rate on real capital gains.

Do the changes affect existing investment properties?

Yes, the proposed transition rules are relevant to existing assets. Gains accruing before 1 July 2027 are intended to retain access to the existing 50% discount, while gains accruing from 1 July 2027 would be subject to the new arrangements.

Should I sell my investment property before 1 July 2027?

Not necessarily. Selling purely because of a tax change could result in other costs and may not be the best long-term financial decision. Your individual circumstances should be assessed before deciding.

Should I get my property valued before 1 July 2027?

A valuation may be relevant when establishing evidence of an asset’s value around the transition period, but the appropriate approach depends on the final legislation and your circumstances. Speak with your accountant before arranging a valuation specifically for tax purposes.

How can an accountant help with the 2027 CGT changes?

An accountant can review your property portfolio, examine your cost-base records, assess potential CGT outcomes, consider different sale scenarios and help you plan around the transition rules.

Get Ahead of the 2027 CGT Changes With Latitude Accountants

The 2027 CGT changes could have significant implications for Australian property investors, particularly those with substantial unrealised gains.

The best time to understand your position is before you make a major investment or selling decision.

At Latitude Accountants, our Chartered Accountants provide proactive tax, accounting and business advisory services designed to help clients make informed financial decisions.

Need help reviewing your property investment and tax position?

Latitude Accountants

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Monday to Friday: 9:00 am – 5:30 pm

Disclaimer

This article provides general information only and does not constitute financial, tax, legal or property advice. Tax legislation and proposed reforms can change, and the application of the 2027 CGT changes will depend on the final legislation and an investor’s individual circumstances. Property investors should obtain professional advice from a qualified accountant or tax adviser before making investment, restructuring or property-sale decisions.