Major changes to Australia’s capital gains tax system will take effect from 1 July 2027, with potentially important consequences for people who own investment properties and other capital assets.
For Western Australian property investors, one practical issue will be establishing what their property was worth around the date the new rules begin.
The Federal Government is replacing the existing 50 per cent CGT discount for most eligible future gains with cost-base indexation linked to inflation, together with a minimum 30 per cent tax rate on real capital gains accruing from 1 July 2027.
The new rules are prospective, meaning gains that arose before that date continue to receive the existing treatment.
That makes 1 July 2027 an important dividing date for investors who already own property.
Why a valuation around 1 July 2027 may matter
The Government’s transitional rules recognise that an asset may have been held for many years before the new CGT arrangements commence.
For assets held across the changeover, gains arising before 1 July 2027 remain under the existing CGT rules, while gains arising after that date fall under the new arrangements.
For an investment property owner, having credible evidence of the property’s market value around the transition date could therefore become important when the property is eventually sold.
An independent valuation prepared around July 2027 may provide useful contemporaneous evidence of market value rather than requiring an owner, accountant or adviser to reconstruct that value many years later.
This does not mean every property investor is legally required to obtain a valuation. The best approach will depend on the individual property, ownership structure and tax circumstances, so owners should speak with their accountant or tax adviser before making decisions.
How capital gains tax works under the current system
Under the current rules, an individual who has held an eligible asset such as an investment property for at least 12 months can generally reduce the taxable capital gain by 50 per cent before the remaining amount is included in assessable income.
The capital gain itself is broadly based on the difference between the proceeds received when the property is disposed of and its cost base.
The cost base can potentially include more than the original purchase price. Depending on the circumstances, it may include certain acquisition costs, capital improvements and other eligible expenditure.
The precise calculation can be complex, which is why property owners should obtain taxation advice rather than relying on a simple purchase-price-versus-sale-price calculation.
What changes from 1 July 2027?
From 1 July 2027, the Government is replacing the existing 50 per cent discount for most future gains with a system designed to tax the real gain after inflation.
The cost base of an asset will be adjusted using inflation, and a minimum tax rate of 30 per cent will apply to relevant real capital gains accruing from that date.
The Government says the change is intended to better distinguish between genuine economic gains and increases in asset values caused simply by inflation.
Importantly, the reform only applies to gains arising from 1 July 2027 onwards. It does not retrospectively change the treatment of gains that accumulated before that date.
Investors in eligible new residential builds will have a choice between the existing 50 per cent CGT discount and the new inflation-based arrangements.
Why use an independent property valuer?
Online property estimates and real estate agent appraisals can be useful when following the market, but a valuation prepared for taxation purposes serves a different purpose.
A professional valuation is normally based on recognised valuation methodology and can consider factors such as:
- property location and land characteristics
- improvements and structures
- physical condition
- zoning and planning considerations
- comparable sales evidence
- market conditions at the relevant valuation date
- characteristics specific to the individual property
Urban & Rural Valuations already provides valuations for taxation purposes, including work associated with capital gains assessments.
Ron Sawyer, proprietor of Urban & Rural Valuations, has more than 30 years of valuation experience, is an Associate of the Australian Property Institute and is a Certified Practising Valuer. His experience covers both urban and rural property across Western Australia.
For a property that may not be sold until many years after July 2027, obtaining a properly documented valuation near the transition date could provide much stronger evidence than attempting to estimate the property’s historical market value retrospectively.
Property condition and improvements should also be documented
A professional valuation is not simply a judgement on how tidy or attractive a property appears on inspection day.
However, the condition of the property, its improvements and significant physical characteristics can all form part of the valuation process.
Property owners may therefore find it worthwhile to keep clear records of renovations, extensions, upgrades and significant maintenance work.
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Keeping records of substantial improvements may also assist an accountant when considering which expenditure can potentially form part of a property’s cost base.
Negative gearing is also changing
The Government is also changing the negative gearing rules for residential investment property from 1 July 2027.
Properties held before 7:30pm AEST on 12 May 2026 are grandfathered, meaning existing arrangements continue for those investments.
For established residential properties acquired after that time, rental losses will generally no longer be deductible against unrelated income such as salary or wages once the new rules commence.
Those losses can instead be applied against residential property income, including relevant capital gains, and unused losses can be carried forward. New residential builds continue to receive more favourable negative gearing treatment.
These changes make the acquisition date and type of investment property increasingly important.
Should investment property owners arrange a valuation now?
There is generally little benefit in obtaining a valuation for a 1 July 2027 market value many months before that date, because the relevant value is the market value around the transition itself.
However, investors who expect to continue holding property across 1 July 2027 should start planning ahead.
It would be sensible to speak with:
- an accountant or tax adviser, to understand how the new CGT arrangements may apply to the particular investment; and
- an independent property valuer, to determine whether a formal valuation around the transition date would be appropriate.
As July 2027 approaches, demand for taxation-related property valuations may also increase, so owners who expect to require one may prefer to organise the process ahead of time.
Independent property valuations in Western Australia
Urban & Rural Valuations is a Western Australian valuation practice providing property valuation services throughout metropolitan Perth, country towns and rural areas of WA.
Ron Sawyer provides valuations for residential, rural, taxation and other professional purposes and can discuss whether a valuation around the July 2027 CGT transition may be appropriate for a particular property.
Property owners who expect to hold an investment property beyond 1 July 2027 can contact Urban & Rural Valuations to discuss their valuation requirements.
Important: This article provides general information only. It is not taxation, financial or legal advice. The application of the new rules will depend on individual circumstances, and property owners should obtain advice from an appropriately qualified accountant, tax adviser or lawyer.
