The 1 July 2027 CGT reset: the number every property investor needs

Most investors have now heard that the 50 per cent CGT discount is going. Far fewer have worked out what that means in practice, which is that on 1 July 2027 every investment property in the country quietly acquires a second, permanent number in its file. Get that number wrong, and you carry the error for as long as you hold the property.

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. It is law, not a proposal, and it takes effect on 1 July 2027.

What actually changes

From 1 July 2027, for CGT assets held by individuals, trusts and partnerships:

• The 50 per cent CGT discount is replaced by cost base indexation, which adjusts your cost base for inflation rather than halving the gain
• A minimum 30 per cent tax applies to net capital gains on assets held for more than 12 months
• Negative gearing on established residential property is limited to new builds, with properties held at 7.30 pm AEST on 12 May 2026 grandfathered

The main residence exemption is untouched. Superannuation funds are not affected by the discount change.

The negative gearing change has had most of the airtime, largely because the grandfathering means a lot of existing investors can stop reading. The CGT change has no such carve-out. It applies to every affected asset regardless of when you bought it.

The bit that creates work for you

The transitional rules split your gain in two.

Your property is treated as though you reacquired it on 1 July 2027 at its market value on that date. The gain that accrued up to that point stays under the old rules and keeps the 50 per cent discount. The gain that accrues afterwards falls under indexation and the minimum tax.

Two consequences follow, and both are easy to miss:

• First, the split is time-based. You do not get to pick whichever regime produces less tax. Pre-reset gains follow the old rules and post-reset gains follow the new ones, whether that helps you or not.
• Second, and this is the practical problem, the 1 July 2027 market value is not optional. It is a figure you will have to put in a tax return, possibly many years from now, for a date that will by then be well in the past.

Pre-1985 property owners should pay particular attention. Gains accrued on pre-CGT assets before 1 July 2027 remain exempt, but the exemption does not extend past that date.

Note: If you have held something since the seventies, the 1 July 2027 value is the line between a lifetime of exempt growth and a taxable future, and it is worth establishing properly rather than approximately.

Two ways to establish the number

You have a choice, and this is where investors are going to lose money without realising it.

Option one is the Treasury's apportioning formula. It is free. It estimates the 1 July 2027 value by assuming your property grew at one steady rate across the whole period you owned it, with ATO tools to support the calculation.

Option two is an independent market valuation as at 1 July 2027.

Note: The formula is perfectly adequate for a property that grew in a boring straight line. Very few properties do.

Think about what a steady-rate assumption does to a Brisbane house bought in 2012. That property went almost nowhere for several years, then ran hard from 2020. Smearing that growth evenly across the whole holding period pushes a large slice of what was actually post-2020 growth back into the pre-2027 period, or pulls it forward, depending on the shape of the curve. Either way, the formula's 1 July 2027 figure is a fiction, and the direction of the error is not in your control.

The formula will tend to work against you where:

• Growth has been uneven. Perth and Brisbane have both had long flat stretches followed by sharp runs. Sydney's cycles are pronounced. A single average rate describes none of them.
• You have renovated. Capital improvements land at a point in time. A straight line spreads their effect across years when they did not exist.
• The property is unusual. Acreage, mixed use, heritage, subdividable land and anything where the highest and best use has shifted. Suburb-average growth rates do not describe these at all.
• Recent growth has been strong. The more of your total gain that accrued in the last few years, the more a steady-rate assumption understates your 1 July 2027 value, and the more of your old-rules discounted gain gets converted into new-rules taxed gain.

That last point is the one to sit with. Every dollar of value that should sit below the 1 July 2027 line and does not is a dollar that loses the 50 per cent discount and picks up indexation and the minimum tax instead. If you want to see what that does to your own position, it is worth modelling the before and after with a CGT calculator before deciding whether a valuation is worth commissioning.

There is a further wrinkle. The formula is elected when you sell. If you wait until then to discover it does not suit your property, your alternative is a retrospective valuation for a date that might be fifteen years gone, built from archived sales evidence rather than a live market. That is a harder, slower and less comfortable exercise than valuing a date as it happens. The evidence does not improve with age.

Which properties are worth the exercise

Not every property justifies a report. Run this filter across your portfolio with your accountant:

• High value, or a large accumulated gain. The bigger the number, the more a percentage point of error costs.
• Long held, especially pre-1985. More years for a smoothed average to distort, and more at stake at the exemption boundary.
• Anything renovated or improved. The formula cannot see capital works.
• Anything you might sell in the next decade. These get valued first, because they are the ones where the number gets used.
• Anything unusual. If a valuer would need to think about it, a formula should not be deciding it.

A property bought recently, in a steady market, with no improvements, in a suburb full of comparable stock, is a reasonable candidate for the free formula. Be honest about which of your properties genuinely fits that description.

What to do between now and then

You have time, which is exactly why this gets forgotten. A workable sequence:

Now. Inventory the portfolio. Mark each property against the filter above and decide which will need a valuation and which can take the formula. It is a one hour conversation with your accountant and it costs nothing.

Through 2026-27. Pull your records together for the properties on the valuation list. Purchase contracts, capital works invoices, dates improvements were completed, dated photographs. This is the evidence base a valuer works from, and it is always easier to assemble before you need it.

Around 1 July 2027. Get the valuations done close to the date. A contemporaneous valuation, prepared with the market in front of the valuer, is stronger evidence and cheaper to produce than the same exercise attempted in 2035. The mechanics of the transitional rules and what a report as at that date needs to contain are set out in more detail in this guide to the 1 July 2027 CGT changes.

After. File it. The report needs to survive until the property is sold, which could be decades. Store it somewhere your executor could find it.

The short version

One date, one number, and a free alternative that quietly suits the ATO's convenience more than your circumstances.

Tip: The investors who come out of this well will be the ones who worked out in 2026 which of their properties needed a real valuation, and had it done while the market was still standing in front of them.

This article is general information about the 1 July 2027 capital gains tax changes. It is not tax advice. Your position depends on your own circumstances and should be confirmed with a registered tax agent before you act.

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