Capital Gains Tax on Property: The 2027 Changes

Capital gains tax on property is the tax on the profit when you sell anything other than your home. Today most investors halve that profit before it’s taxed. From 1 July 2027 that changes for any gain made after that date, under a law passed in June 2026, and a property you already own will usually end up taxed under both sets of rules at once, one for the years before that date and one for the years after.

Your own home is still exempt. The rest of this guide is about investment property.

How CGT on property is worked out today

The gain is what you receive on sale less the property’s cost base. The ATO’s own example is Rhi, who sells an investment property for $600,000 with a cost base of $530,000: a $70,000 capital gain. The cost base is more than the price. It includes stamp duty, legal fees and capital improvements, and it leaves out anything you’ve already deducted, so capital works claimed over the years come back off it. Keep the settlement statement from the purchase and every invoice for improvements, because a cost you can’t prove is a cost you can’t count.

If you’ve owned the property for at least 12 months and you’re an Australian resident, you halve the gain before it’s taxed. The halved figure is added to your income for the year and taxed at your marginal rate. Two details catch people. The tax year is set by the contract date, not settlement, and a capital loss can only reduce capital gains, never your salary.

The date that decides the rules

The ATO is clear that the CGT event happens on the date of the contract, not at settlement, and its own example puts a June contract that settles in July into the earlier tax year. That makes the contract date the line between the old rules and the new ones. A contract signed on 30 June 2027 is taxed under today’s rules even if it settles weeks later.

The tax itself isn’t paid at settlement. It’s worked out in your return for the year the contract falls in, alongside the rest of your income.

What changes under the new law

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 is law, and the ATO’s summary says the 50% discount will be replaced by cost base indexation and a 30% minimum tax for individuals, trusts and partnerships, for gains accruing from 1 July 2027.

The split is the key idea, as the Budget explainer sets it out. The gain up to the property’s value on 1 July 2027 keeps the 50% discount. The gain after it isn’t discounted; instead that 1 July 2027 value is indexed by inflation, using the CPI, so only the real gain is taxed. Then a minimum tax makes sure the newer gain bears at least 30%. If your marginal rate is already 30% or more, it adds nothing.

Indexation uses the All Groups CPI, the weighted average of the eight capital cities, and the factor is worked to three decimal places. For a property held on 1 July 2027 the starting point is the quarter beginning that day, so inflation before then doesn’t count toward the newer gain.

It bites on lower incomes. The Budget explainer’s own example has $25,000 of income and a $10,000 gain, which costs $1,600 more than before, because 14% on the gain is topped up to 30%. People receiving the Age Pension, JobSeeker and several other listed payments that year are exempt from the minimum tax under the Act’s list. New builds can choose to keep the discount instead.

Valuing your property at the changeover

Because the gain is split at that date, the value on it matters, and the default is market value. The law also lets the Minister set an apportioning method, and Treasury consulted on a draft in August 2026 that assumes the property grew at a steady daily rate across the whole time you’ve owned it. When we checked on 11 October 2026 it hadn’t been made, and the ATO’s pages said its resources would come later.

For most owners on the North Shore, a valuation dated close to the changeover will be worth having on file, especially where the value has moved a long way since purchase. Ask your accountant which method suits your property before you pay for one.

A hypothetical, run through the calculator

Here’s a hypothetical with invented numbers, run through our capital gains tax calculator. An investor on $150,000 bought a unit for $950,000 plus $40,000 of costs and sells for $1,450,000, with $30,000 of selling costs, after holding it for well over a year. The gain is $430,000.

Under today’s rules, with the discount, the calculator puts the tax at about $97,850, roughly 23% of the gain. Sell the same unit under the new rules, with a value of $1,300,000 at 1 July 2027 and no indexation yet, and it’s about $126,050, though indexation would bring that down by an amount that depends on inflation nobody can know yet.

How it meets the negative gearing change

The same Act limits negative gearing for established homes bought after 7:30 pm on 12 May 2026. From 1 July 2027 their rental losses can’t reduce your salary, but they can reduce residential capital gains, on that property or another. So a carried-forward loss isn’t wasted. It waits for a sale. Our negative gearing guide covers that side.

Your home, and the one you moved out of

The main residence exemption is untouched by the 2026 law. A home is fully exempt if it was your home the whole time you owned it, wasn’t used to earn income, and sits on 2 hectares or less. If you move out and rent it, you can keep treating it as your main residence for up to 6 years, the so-called 6-year rule, and the clock resets each time you move back in.

Past that, the exemption becomes partial, and if you first rented it after 20 August 1996, the ATO uses its market value on that day in working out the gain. That’s why a valuation on the day you move out is worth paying for.

Should you sell before July 2027?

Our view, and some agents will push the opposite: rushing a sale before the changeover to keep the discount usually buys you very little. The gain you’ve made up to that date keeps the full discount anyway. Only the growth after it is taxed the new way. Selling early to save tax on gains you haven’t made yet is how people end up paying agents’ fees and stamp duty twice, once to sell and again to buy back into the market.

The exception is a low-income seller who’d fall under the minimum tax, such as a retiree before Age Pension age. That’s a conversation for an accountant, with numbers.

Sina’s part is the loan side, and it matters more than people expect. If you’re selling an investment to fund the next purchase, the tax isn’t paid at settlement; it’s assessed in your next return. Lenders won’t count money you owe the ATO as a deposit, so we set it aside in the numbers before we look at what you can borrow for the next property, which can change the budget a lot on a large gain. What we can’t do is give you tax advice, or tell you what your property will be worth on the changeover date. Your accountant should confirm the figure before you sign.