If you own an investment property, you may have heard that the Government is changing Australia’s Capital Gains Tax (CGT) rules. But what does that actually mean for you and a property you may have owned for years?
Following on from our recent article about the changes to negative gearing, it is important to take a closer look at another major tax reform that you as a property investors need to understand.
The Government has legislated changes to the way capital gains will be taxed from
1 July 2027. There has been a lot of discussion about these reforms, so let’s look at what is actually changing — and what is not.
What is changing?
Under the current rules, Australian resident individuals, partners and trusts that have held an eligible CGT asset for at least 12 months can generally apply a 50% CGT discount to a capital gain, after taking into account any available capital losses.
From 1 July 2027, the existing 50% CGT discount will be replaced for relevant assets with a system based on cost-base indexation.
Indexation is applied to the cost base to ensure that capital gains tax is levied only on the real economic increase in value. The cost base will be adjusted for inflation so that the tax system ensures you are only taxed on the real increase in value, not on the portion of the gain that is just due to rising prices in the economy. By removing the inflation component, indexation prevents taxpayers from being taxed on nominal gains that do not represent an actual improvement in their economic position, thereby aligning the tax outcome with genuine growth in the asset’s value.
A minimum tax rate of 30% will also apply to relevant real capital gains accruing from 1 July 2027, subject to the detailed rules and exemptions.
The Government’s stated intention is to ensure investors are taxed on their real capital gains while reducing the benefit of the current flat 50% discount.
Importantly, this does not necessarily mean every investor will pay more tax. The outcome can depend on factors including the investment’s rate of return, inflation and how long the asset is held.
What happens if I already own an investment property?
This is one of the biggest questions for property investors.
The reforms are prospective.
This means the existing 50% CGT discount will continue to apply to eligible capital gains accruing before 1 July 2027.
Capital gains accruing from 1 July 2027 will generally be subject to the new indexation arrangements. This does not mean that the entire capital gain on an existing property suddenly loses the 50% discount simply because the property is sold after 1 July 2027.
The reforms are designed to recognise gains accruing before the new rules commence separately from future growth.
The detailed rules for calculating and apportioning gains before and after 1 July 2027 are being developed through the implementation process and supporting guidance.
Imagine you purchased an investment property several years ago and it has increased substantially in value.
If you continue to hold the property beyond 1 July 2027, the tax treatment is not simply:
“Sell after 1 July 2027 = no 50% discount.”
Instead, the reforms are designed to distinguish between:
- the gain accruing before the new rules commence; and
- the gain accruing after the new rules commence.
The exact calculation will depend on the legislation, the circumstances of the asset and the rules applying at the time of the CGT event.
This is why keeping good records of your property’s purchase price, improvements and other amounts forming part of the cost base is so important.
Should I sell my investment property before 1 July 2027?
Not necessarily.
It may be tempting to think that selling before the changes take effect will automatically produce a better tax outcome.
However, selling an investment property is a major financial decision and tax is only one part of that decision.
Before selling, consider:
- Your property’s current market value
- Your cost base
- The potential capital gain
- How long you have owned the property
- Rental income
- Holding costs
- Selling costs
- Financing arrangements
- Ownership structure
- Your broader financial goals
- The future tax treatment
Selling an investment simply to avoid a future tax change may not leave you financially better off.
What if I am thinking about buying an investment property now?
This is where the CGT changes need to be considered alongside the recently legislated changes to negative gearing.
From 1 July 2027, negative gearing for certain residential investment properties acquired after 7:30pm AEST on 12 May 2026 will be restricted.
Existing investments acquired before the announcement will be protected from the new restrictions, while eligible new-build residential properties will continue to have access to negative gearing under the new rules.
Commercial property and other asset classes, such as shares, are not subject to these new residential negative-gearing restrictions.
Anyone considering an investment property should therefore consider both the negative-gearing changes and the CGT changes.
What about new-build properties?
There is specific treatment for eligible new-build residential properties.
Investors who purchase eligible new builds will be able to choose between:
- the existing 50% CGT discount; or
- the new indexation and minimum-tax arrangements.
This choice will apply when they eventually realise the gain.
The Government has been consulting on the detailed implementation of the reforms, including the definition and treatment of eligible new builds.
This is an important area to obtain current advice on before making an investment decision.
Does this change only affect property?
No.
The CGT changes are broader than residential investment property.
They apply to relevant CGT assets held by individuals, partners and trusts, subject to the specific rules and exemptions.
Investors with shares and other CGT assets may also need to consider how the new arrangements could affect them.
However, the tax treatment can vary depending on the type of asset, how it is held and the circumstances of the taxpayer.
What about eligible small business owners?
There is some good news for eligible small business owners.
The Government has confirmed that the four existing small-business CGT concessions will remain available, subject to their existing eligibility requirements.
These concessions can potentially reduce or completely eliminate CGT on qualifying business assets.
The Government has also announced that the turnover threshold for the 50% active asset reduction will increase from $2 million to $10 million from 1 July 2027.
This means the CGT reforms do not automatically remove access to the existing small-business CGT concessions.
What should you do as a property investor?
There is no need to panic.
However, the changes make this a good time to review your position.
- Know your cost base
Ensure you have records of the original purchase price and eligible costs associated with acquiring, holding and improving the property.
- Keep your records
Good records will be essential when calculating your eventual capital gain.
- Review your ownership structure
Whether a property is owned personally, jointly or through a trust can affect the tax treatment.
- Avoid tax-driven decisions
Tax should not be the only reason for buying, selling or retaining an investment.
Consider the property’s rental return, financing, expected growth, risks and your broader financial position.
- Get advice before selling or restructuring
Selling or transferring an investment property can itself create tax consequences.
Before making a significant decision, it is worth understanding the potential tax outcome first.
The bottom line
The changes to Australia’s CGT rules are significant, but property investors don’t need to panic.
The new arrangements are intended to commence from 1 July 2027.
For existing investments, the 50% CGT discount will remain available for eligible gains accruing before the new rules commence, while future capital growth will be dealt with under the new indexation arrangements.
The detailed rules for some aspects of the reforms are still being developed, so it is important to obtain current information before making significant investment or disposal decisions.
The most important thing is to understand how the changes may interact with your particular property, ownership structure and overall financial position.
Don’t make an investment decision based on a headline.
Tax is only one part of the investment equation.
If you own an investment property or are considering purchasing one and would like to understand how the changes may affect you, contact MAS Tax Accountants Joondalup to discuss your individual circumstances before making any major decisions.
This article is intended as general information only and does not constitute personal tax, financial or investment advice. Tax legislation and supporting guidance may be subject to further amendments and clarification. Readers should obtain professional advice based on their individual circumstances before making investment, restructuring or disposal decisions.
Information current as at August 2026.
Written by Tania Wishart
Accountant | MAS Tax Accountants Joondalup
September 2026
