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ATO CGT Formula vs Property Valuation: Which Could Be Better for Your Investment Property?

Compare the proposed CGT formula with a property valuation at 30 June 2027

And see how the timing of investment property growth may affect your tax.

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Australia’s Capital Gains Tax (CGT) rules are set to change from 1 July 2027, making the way investment property gains are split between the existing and new rules an important consideration for property investors.

John Saade of Latitude Accountants recently explored this issue by building a calculator to compare two approaches: obtaining a formal market valuation at 30 June 2027 or using the proposed Treasury apportionment formula.

The key question is not simply whether your property has increased in value. It is when that growth occurred.

What Is Changing With CGT From 1 July 2027?

From 1 July 2027, the Government intends to replace the existing 50% CGT discount with an inflation-based indexation approach, together with a 30% minimum tax rate on capital gains. The new arrangements are intended to apply to capital gains accruing from 1 July 2027, while gains accrued before that date retain access to the existing 50% discount.

This creates a transition point for assets such as investment properties that were purchased before the changes take effect.

The challenge is determining how much of the eventual capital gain relates to the period before 1 July 2027 and how much relates to the period afterwards.

Should You Get Your Investment Property Valued? What the 2027 CGT Changes Could Mean with John Saade of Latitude Accountants

Two Ways to Allocate the Property’s Growth

For certain assets without a readily ascertainable market value, Treasury has been consulting on a method for apportioning capital gains and losses across the pre- and post-1 July 2027 periods.

For investment property owners, the comparison discussed in John Saade’s calculator is between:

  • A formal valuation at 30 June 2027.
  • The proposed apportionment formula, which works through a prescribed calculation rather than using the property’s actual market value on that date.

The distinction matters because property prices do not necessarily increase at a consistent rate every year.

A property might increase sharply over a short period and then remain relatively flat. Alternatively, it could experience limited growth initially before increasing substantially several years later.

Why the Timing of Property Growth Matters

Consider two properties that are eventually sold for the same amount.

If Property A experienced most of its growth before 30 June 2027, a formal valuation may provide a different result from a formula that effectively allocates growth across the ownership period.

If Property B experienced most of its growth after 30 June 2027, the calculation can produce a different outcome.

This means the shape of the property’s growth curve can be just as important as the property’s eventual sale price.

John Saade’s calculator was designed to demonstrate this difference using several hypothetical scenarios.

Scenario 1: Steady Property Growth

One example involved:

  • Purchase price of approximately $1 million
  • Additional costs and improvements bringing the cost base to around $1.1 million
  • Purchase date of 30 June 2022
  • Estimated 30 June 2027 value of approximately $1.475 million
  • Future sale price of $2 million
  • Sale date of 30 June 2032

In this example, the property’s growth was relatively steady.

The calculator produced tax outcomes that were quite close between the valuation and formula approaches. The example showed approximately $222,000 of tax using the valuation compared with approximately $224,000 using the formula.

After allowing for an assumed $700 valuation cost, the valuation still came out approximately $1,474 ahead in the example. The calculator also indicated a break-even valuation of approximately $1.47 million.

The important point is that when growth is relatively consistent, the difference between the two approaches may be comparatively small.

Scenario 2: Most Growth Happens After 2027

The second example looked at a more recently purchased property.

The hypothetical property was:

  • Purchased for $1.8 million in 2025
  • Worth approximately $1.9 million around 2027
  • Eventually sold for $3 million

Here, most of the property’s growth occurred after the 2027 transition point.

The calculator produced approximately $377,000 of tax using the valuation approach, compared with approximately $301,000 using the formula.

In this scenario, paying for a valuation may not produce a tax benefit because relatively little growth had occurred before 30 June 2027.

This illustrates why obtaining a valuation simply because the CGT rules are changing may not automatically make financial sense.

Scenario 3: Significant Growth Before 2027

The opposite situation can produce a much larger difference.

Another example assumed:

  • A purchase price of approximately $1 million
  • A value of approximately $1.99 million by 2027
  • An eventual sale price of approximately $2.5 million

In this scenario, a substantial portion of the property’s growth had already occurred before the transition date.

The calculator estimated approximately $331,000 of tax under the formal valuation approach, compared with approximately $483,000 under the formula.

That is a difference of around $152,000 after allowing for the assumed $700 valuation fee in the example.

This demonstrates why investors who have experienced significant pre-2027 growth may want to investigate the valuation option carefully.

What Could Cause Significant Pre-2027 Growth?

A property’s value can increase for many reasons, including:

  • Strong growth in the local property market
  • Major infrastructure improvements
  • Changes to the surrounding suburb
  • Increased demand for the area
  • Renovations or improvements
  • Development potential
  • Limited local property supply

If your investment property has increased substantially compared with what you originally paid, obtaining professional advice before the transition date may be worth considering.

Does a Property Valuation Always Make Sense?

No.

The calculator examples demonstrate that the answer depends on several variables, including:

  • Original purchase price
  • Cost base
  • Property value at 30 June 2027
  • Eventual sale price
  • Holding period
  • Future property growth
  • Inflation assumptions
  • Ownership percentage
  • Applicable tax circumstances
  • Cost of obtaining a valuation

For example, the video’s sensitivity analysis showed that slower growth after 2027 can change whether paying for a valuation makes economic sense.

This is why there is no single answer that applies to every investment property.

What About a Retrospective Valuation?

The 30 June 2027 date is important because it is the valuation date being considered for the transition.

However, John Saade’s video notes that this does not necessarily mean investors must physically have a valuation report in their hands on 30 June 2027. A retrospective valuation from a suitably qualified independent valuer may be possible after the date.

Investors should obtain professional advice about the requirements that apply to their circumstances rather than assuming a retrospective valuation will always be accepted.

How Should Property Investors Prepare?

If you own an investment property that you expect to hold beyond 1 July 2027, consider reviewing your position well before the transition.

You may want to:

  1. Establish your current cost base
    Gather purchase costs, eligible improvements and other relevant records.
  2. Monitor the property’s market value
    Review comparable properties and recent sales to understand how much the property may have grown.
  3. Consider the timing of your growth
    Ask whether most of your property’s increase in value occurred before or after 30 June 2027.
  4. Compare the two approaches
    A tax professional can help model the potential outcomes under the applicable rules.
  5. Consider the cost of a valuation
    The potential tax difference needs to be weighed against the cost of obtaining a professional valuation.
  6. Keep supporting documentation
    Maintain purchase records, renovation costs, valuations and other relevant evidence.

The Bottom Line

The comparison between a formal property valuation and the proposed CGT apportionment formula is ultimately about how your property’s growth is allocated over time.

If a property has experienced substantial growth before 30 June 2027, a formal valuation may produce a materially different result from the formula.

If the property was purchased recently and most of its expected growth occurs after 1 July 2027, the formula may produce a different outcome.

And where growth has been relatively steady, the difference may be much smaller.

The examples in John Saade’s calculator are hypothetical and rely on assumptions. They demonstrate why property investors should look at their own numbers rather than relying on a general rule.

Should You Get Your Investment Property Valued? What the 2027 CGT Changes Could Mean with John Saade of Latitude Accountants

Frequently Asked Questions About CGT Formula vs Property Valuation

Do I need to value my investment property before 30 June 2027?

Not necessarily. Whether a valuation is worthwhile depends on your circumstances, including the property’s growth before and after the transition date.

What is the Treasury CGT apportionment formula?

It is a proposed method for allocating capital gains between periods before and after 1 July 2027 for relevant assets. Treasury has been consulting on the detailed implementation of the new rules.

Why could a valuation make a difference?

A valuation can establish the property’s market value at the transition date. This can be relevant where the property experienced significant growth before 1 July 2027.

What if most of my property’s growth happens after 2027?

The potential benefit of obtaining a valuation may be lower, depending on your circumstances. The calculator example in John Saade’s video demonstrates how later growth can produce a different outcome.

Does this apply to my family home?

The example discussed in the video focuses on investment property. Your main residence can have different CGT treatment, including the main residence exemption, so specific advice is important.

Can Latitude Accountants help me compare the options?

Yes. If you are unsure how the proposed CGT changes could affect your investment property, Latitude Accountants can help you understand the tax considerations and model your position.

Latitude Team

Speak With Latitude Accountants

The proposed 2027 CGT changes could have different consequences depending on your property’s history, growth pattern and plans.

If you own an investment property and want to understand whether a formal valuation or the applicable apportionment method could be relevant to your situation, speak with the team at Latitude Accountants.

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

Disclaimer

This article is general information only and does not constitute financial, legal, tax, property or business advice. The 2027 CGT changes and their implementation may involve detailed rules and transitional arrangements. The examples in this article are illustrative and based on assumptions. You should obtain professional advice based on your individual circumstances before making decisions about property valuations, CGT or the sale of an investment property.

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