For Australian investment property owners, the timing of property growth could become an important consideration when the Capital Gains Tax (CGT) rules change from 1 July 2027.

The Government’s planned reforms will replace the existing 50% CGT discount with an inflation-based indexation approach for gains accruing from 1 July 2027, alongside a 30% minimum tax rate on real capital gains. Gains accrued on eligible existing investments before the start date will retain access to the 50% discount.

This means the same property could have capital growth occurring under two different CGT treatments.

As John Saade of Latitude Accountants explains, the important question for property investors is not simply how much their property grows, but when that growth happens.

Why the Timing of Property Growth Matters

Property prices do not necessarily increase at a consistent rate.

An investment property might:

• Experience substantial growth shortly after purchase
• Remain relatively flat for several years
• Increase sharply because of changes in the local market
• Benefit from renovations or improvements
• Grow steadily throughout the entire holding period
• Experience most of its growth after 1 July 2027

This matters because the proposed CGT changes distinguish between gains accruing before and from 1 July 2027.

For an investment property held across this transition, understanding the property’s growth pattern could therefore help explain why different calculation methods may produce different tax outcomes.

What Happens to Property Growth Before 1 July 2027?

Under the proposed changes, eligible capital gains accruing before 1 July 2027 will retain access to the existing 50% CGT discount.

Capital gains accruing from 1 July 2027 will instead be subject to the new inflation-based approach and minimum tax rules.

This creates an important transition point for property investors.

Imagine you purchased an investment property several years ago and it has increased significantly in value by 30 June 2027.

A substantial portion of the property’s overall growth may have already occurred before the new rules begin.

That is very different from purchasing a property shortly before 2027 and seeing most of its growth happen several years later.

What If Most of the Growth Happens After 2027?

Now consider a property purchased in 2025 for $1.8 million.

By 30 June 2027, suppose it is worth approximately $1.9 million.

If the property eventually sells for $3 million, most of the growth in this example occurs after the 2027 transition point.

John Saade’s calculator used a similar hypothetical scenario. It produced an estimated tax outcome of approximately $377,000 under the valuation scenario compared with approximately $301,000 under the formula used in the example.

The figures are illustrative and depend on the assumptions entered into the calculator, but they demonstrate the broader concept: a property with limited growth before 2027 can produce a very different result from one that experiences substantial pre-2027 growth.

What If Your Property Has Already Grown Significantly?

The opposite situation can be particularly important to examine.

Consider a hypothetical property purchased for $1 million that is worth approximately $1.99 million around 2027, before eventually being sold for $2.5 million.

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

John Saade’s calculator estimated approximately $331,000 of tax using the formal valuation scenario compared with approximately $483,000 using the formula in the example.

That represents a difference of approximately $152,000 after the assumed $700 valuation cost.

This does not mean every property with strong pre-2027 growth will produce the same result. It demonstrates why the timing and pattern of growth can be important when considering the transition.

Property Growth Is Not Always a Straight Line

One of the key issues highlighted by John Saade’s calculator is that property growth is rarely perfectly linear.

For example, a property’s value could look like this:

2022: $1 million
2024: $1.15 million
2026: $1.60 million
2027: $1.80 million
2032: $2.20 million

The property has not grown by the same amount each year.

Another property might eventually reach the same $2.20 million sale price but experience most of its growth between 2027 and 2032.

Although the final sale price is identical, the timing of the growth is different.

That is why simply looking at the purchase price and eventual sale price may not tell the whole story.

What About Renovations and Improvements?

Renovations can also complicate the picture.

A property may increase in value because the owner:

• Renovates the kitchen
• Adds a bathroom
• Improves outdoor areas
• Undertakes structural improvements
• Changes the property’s functionality
• Completes other capital improvements

These improvements can affect the property’s cost base and may also influence its market value.

If substantial improvements are made before 30 June 2027 and the property subsequently increases significantly in value, it may be worth discussing the CGT implications with a tax professional.

Keeping detailed records of eligible costs is also important.

How Can Investors Assess Their Position?

Rather than assuming that every investor should obtain a valuation, consider the broader picture.

1. Look at When You Purchased

A property purchased many years before 2027 has had more opportunity to experience pre-2027 growth.

A recently purchased property may have relatively little growth before the transition.

2. Estimate the Property’s 30 June 2027 Value

Review comparable sales and other available market information to develop an indication of what the property may be worth.

This is not a substitute for a professional valuation, but it can help you understand your position.

3. Review Your Cost Base

Make sure you have records of relevant purchase costs, capital improvements and other amounts that may form part of your property’s cost base.

4. Consider Your Expected Sale Date

The eventual sale price and holding period can materially affect the overall CGT calculation.

A property sold relatively soon after 2027 may have a different outcome from one held for another 10 or 20 years.

5. Model Different Growth Scenarios

John Saade’s calculator demonstrates why changing assumptions about future growth can change the result.

For example, slower growth after 2027 can produce a different outcome from stronger ongoing growth.

Does Everyone Need a Property Valuation?

No single approach will suit every investor.

The potential value of obtaining a formal valuation depends on factors such as:

• Your property’s value at 30 June 2027
• Your original cost base
• How much growth occurred before the transition
• Expected future growth
• Your eventual sale price
• Your ownership structure
• Your applicable tax circumstances
• The cost of obtaining a professional valuation

The Government has also indicated that further details of the CGT reforms will be addressed through additional legislation and consultation.

For that reason, investors should avoid making decisions based solely on a general example.

What About Your Family Home?

The discussion around this transition is primarily relevant to assets subject to CGT.

A qualifying main residence can be covered by the main residence exemption, meaning the CGT treatment can be different from that of an investment property.

The same principle applies to other assets where market values may already be readily available.

The important point is to identify which assets are actually affected before considering whether a valuation is necessary.

The Key Takeaway for Property Investors

The most important question may not be:

“How much will my property be worth when I sell?”

It may also be:

“How much of that growth occurred before and after 1 July 2027?”

A property that experiences substantial growth before the transition could have a very different CGT profile from a property that experiences most of its growth afterwards.

Steady growth may produce a result somewhere between these two scenarios.

This is why reviewing your property’s history, cost base, estimated value and expected future growth can be useful before making a decision about valuation or CGT planning.

John Saade’s calculator is designed to demonstrate these differences, but it relies on assumptions and is not a substitute for individual tax advice.

Frequently Asked Questions About Property Growth and CGT

Why does property growth before 2027 matter?

Eligible capital gains accruing before 1 July 2027 retain access to the existing 50% CGT discount under the proposed transition arrangements. Gains accruing from 1 July 2027 will be subject to the new inflation-based approach and minimum tax rules.

What if my property grows very little before 2027?

If most of the property’s expected growth occurs after 1 July 2027, the potential benefit of establishing a 30 June 2027 valuation may be different from a property that has already experienced substantial growth.

What if my property has increased substantially before 2027?

It may be worth discussing the potential CGT implications with a tax professional and considering whether a formal valuation could be relevant to your circumstances.

Does renovation affect my CGT calculation?

Capital improvements can affect your property’s cost base, while improvements may also contribute to changes in market value. Keep detailed records and discuss the treatment of specific expenses with your tax adviser.

Will every investment property be affected in the same way?

No. The outcome can depend on the property’s cost base, growth pattern, holding period, ownership structure, sale price and other individual circumstances.

When should I review my investment property’s position?

If you expect to hold your property beyond 1 July 2027, reviewing your records, cost base and expected growth before the transition can help you understand what questions to raise with your accountant.

Speak With Latitude Accountants

The 2027 CGT changes introduce an important transition for Australian investors.

If you own an investment property and want to understand how its growth before and after 1 July 2027 could affect your future CGT position, the team at Latitude Accountants can help you work through the relevant numbers and considerations.

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton | Adelaide
📞 1300 706 597
📧 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 include detailed transitional and implementation rules, and further details may be legislated or updated. Examples in this article are illustrative and based on assumptions from the accompanying video and calculator. You should obtain professional advice based on your individual circumstances before making decisions about CGT, property valuations or investment property transactions.