How property investors can prepare for the 2027 CGT changes

From 1 July next year, the 50% capital gains tax (CGT) discount that's been in place for over a quarter of a century will largely come to an end.  

It will be replaced by a system of indexation, with a minimum tax rate of 30% applying to real capital gains.

As the table below shows, the CGT reforms announced in the Federal Budget only apply to gains made after 1 July 2027.  

Gains made before 1 July 2027 will continue to benefit from the 50% CGT discount.

Timing of gains	Tax treatment under the new rules
Before 1 July 2027	The existing 50% CGT discount applies if the asset has been owned for at least 12 months.
After 1 July 2027	The cost of the investment is adjusted for inflation (using CPI figures). A minimum 30% tax rate will apply to the 'real' (after-inflation) capital gain. Investors in eligible new-build properties can choose between the 50% CGT discount and the new rules.

The need for a 'cost base' as at 1 July 2027

When the CGT system switches over on 1 July 2027, you'll need a "cost base" for investments you already own.  

The value you use matters. The higher the value, the lower the gain that falls under the new rules and the less tax you may pay.  

But as with all things tax-related, the Australian Taxation Office (ATO) likes to see credible proof of how you arrived at a cost base figure.  

Property: it deserves special care

One area that deserves special care is real estate – this includes residential property, commercial property, holiday homes, and vacant land. 

Property is an unlisted asset – and as few properties are truly identical, it can be challenging to find an accurate value at a given point in time.  

In addition, property is a high-value investment. A small difference in the value applied at 1 July 2027 can make a big difference to your future CGT bill.  

How will you prove what your property was worth on 1 July 2027?

As it stands, investors can choose between two ways to value their property.  

Option 1: Government valuation formula

Treasury has proposed a do-it-yourself valuation formula. 

With this method, you don't need to take any action now. You can wait until the property is sold at some future date.  

When you sell, you would use the nine-step formula, working backwards from the eventual sale price to reach a value as at 1 July 2027 using a constant compounding growth rate.  

Not only is the formula complex, it assumes that property values grow at an even pace over time, which rarely happens in the real world. Renovations, neighbourhood gentrification, and local infrastructure developments can all drive a rapid hike in a property's value.  

The upshot is that the formula may not provide a truly accurate value for your property.

Option 2: a professional valuation  

The other option is to have your property professionally valued. 

A formal valuation doesn't have to be completed on 1 July 2027. Retrospective valuations are possible though they're not ideal. Records can be lost, markets can change, or you may complete improvements on the place.  

That's why it can be a good idea to have a valuation completed close to mid-2027 even if you have no immediate plans to sell. 

The Australian Property Institute adds that a valuation made close to 1 July 2027 is more reliable, credible and defensible than a retrospective valuation prepared years after the event.  

But there's a catch.  

Around 2.3 million Australians own at least one investment property. On top of that, there are around 250,000 commercial and agribusiness investment properties.  

Chances are, a lot of these investors will want a valuation conducted around mid-2027.  

However, there are relatively few valuers, with only around 5,000 API-accredited valuers nationally. Some work for big firms like Herron Todd White, CBRE, Acumentis, and Opteon. Others are employed by smaller, independent firms. 

Whatever the case, soaring demand could see valuers booked out long before July next year. Acumentis, for example, is already taking bookings for mid-2027.  

This can make it worth booking your valuation now if this is the path you choose to take.  

Yes, a formal valuation will cost you.

Valuations for CGT purposes can cost between $700 and $1,400, depending on the nature and location of the property and the valuer you select (do shop around). The cost can jump by as much as 50% if a valuation is needed urgently – within one or two days.  

Either way, with demand likely to outstrip the supply of valuers, the cost of valuations could climb higher. 

Despite this, a formal valuation can more than pay for itself.  

In one scenario modelled by Herron Todd White, using a professional valuation rather than the formula resulted in $248,000 less taxable profit.  

The fine print

The ATO warns that "valuations undertaken by professional valuers are more credible than those provided by someone who isn't a professional valuer".  

In other words, a value provided by your local real estate agent or a free online estimate is unlikely to be enough if the ATO questions your figure.  

A few carve-outs on the new 30% minimum CGT rate

Bear in mind, investors who purchase an eligible new-build property can still use the 50% CGT discount after 1 July 2027.  

Also, the 30% minimum tax rate won't apply to certain income-support recipients, including Age Pension recipients. Instead, they'll pay CGT at their personal marginal rate.  

It may be a long shot, but if you're close to qualifying for Centrelink income support, it could be worth holding off on a sale.  

The bottom line – the time to prepare is now

As we roll towards the end of the year, it can be easy to put off preparing for the new CGT regime.  

By taking action today, investors have time to talk things over with their tax adviser, financial planner and professional property valuer – and develop a roadmap for the changes. 

If you're looking for a valuer, check out the Australian Property Institute's online database.  

How to value other investments for 1 July 2027

For many investments, you'll need a market value as at 1 July 2027 (classic cars, for example, are typically exempt from CGT).  

Here's a quick guide to how different assets can be valued.

Investment	How to value as at 1 July 2027
Listed investments - shares and ETFs	Use the closing price listed on the Australian Securities Exchange (ASX).
Unlisted managed funds	Your fund manager should provide the official unit price (or NAV per unit) for that date.
Cryptocurrencies such as Bitcoin	Use the market price as at 1 July 2027.
Collectables - such as artworks, jewellery or antiques that cost more than $500	You may need a 'defensible' asset value provided by experts in the field or your own well-documented research.