Many Australian property investors are focused on the proposed changes to negative gearing and capital gains tax announced in the 2026 Federal Budget.
But one of the more important practical questions may not be whether to buy or sell before the reforms begin. It may be whether you have the right documentation in place before 1 July 2027.
Under the proposed CGT reforms, investors holding property across the transition date may need to work out how much of any future gain accrued before 1 July 2027 and how much accrued after it.
Westpac Senior Economist Matthew Hassan said the proposed reforms represented a major shift in Australia’s property investment landscape.
“[The government will] change arrangements that have been in place for 26 years, and while there’s a lot of grandfathering coming with the changes, they’re expected to transform housing markets over the longer term in Australia,” he said
That split may influence how future capital gains are taxed once the property is sold.
For many investors, the key number in that calculation may be the property’s market value on 1 July 2027.
And according to tax professionals, obtaining a formal valuation around that date may become an important part of long-term record keeping and tax planning.
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Senior Financial Adviser, Sangram Rana, from BuildMyWealth said investors should avoid treating the reforms purely as a tax issue.
“Investors should start with the plan, not the tax rule,” he said. “Tax law changes. Investment goals don't.”
Importantly, the reforms have been announced but are not yet legislated. Final implementation details may still change before commencement.
Hassan said there was also a risk some investors could overestimate the immediate impact of the reforms amid heightened policy uncertainty.
“With complex changes and a highly politicised environment, there can be misinformation and poor information feeding into assessments,” he said.
“There’s a risk that there’s just a fear factor associated with this and that the impact of the changes may be overestimated.”
He added that while the reforms were significant over the medium to long term, they were not expected to be “overly disruptive near term”.
What is actually changing under the proposed CGT reforms?
Under the proposed reforms, gains accrued before 1 July 2027 would generally retain the existing 50% CGT discount, while gains accrued after that date would fall under the new framework.
For existing property owners, the reforms are designed to preserve the current rules for gains accrued before the transition date while applying the new framework to gains accrued after it.
That means investors holding property across the transition date may need to calculate:
Period | Proposed treatment |
|---|---|
Growth before 1 July 2027 | Existing 50% CGT discount rules |
Growth after 1 July 2027 | Cost base indexation (purchase price adjusted for inflation via CPI), with a 30% minimum tax rate on the real capital gain |
The treatment also differs depending on the type of property held:
Property type | Proposed CGT treatment |
|---|---|
Established property (purchased before 7:30pm AEST 12 May 2026) | Gains split at 1 July 2027 — 50% discount applies to pre-2027 gains; indexation + 30% minimum tax applies to post-2027 gains |
Established property (purchased after 7:30pm AEST 12 May 2026) | Gains accrued before 1 July 2027 retain the 50% discount; indexation + 30% minimum tax applies to gains accruing from 1 July 2027 |
Qualifying new builds | Investor can elect either the 50% CGT discount or the new indexation/minimum tax framework on sale |
Investors who have held property since before 20 September 1985 should be aware that the proposed reforms bring these assets into the CGT regime for gains accruing after 1 July 2027.
These assets have historically been entirely exempt from CGT. Gains accrued before 1 July 2027 remain tax-free, but a valuation at that date will be required to establish the boundary between the exempt and taxable portions of any future gain.
For a smaller group of long-term owners, the implications can be even more significant.
For pre-1985 assets, the original purchase price is unlikely to be the relevant cost base. The 1 July 2027 valuation effectively becomes the starting point for all future CGT calculations, making an accurate valuation particularly important for this group. Owners of pre-1985 assets may wish to seek specialist advice as a priority, given the significance of this change.
For further information on how the reforms affect pre-CGT assets, refer to the ATO's overview of the proposed changes and the 2026-27 Budget tax reform page.
In practical terms, this means the property’s value at 1 July 2027 could become an important reference point when the asset is eventually sold.
For everyday investors, this is less about short-term tax strategy and more about long-term record keeping and planning. A valuation obtained at the right time may help provide a clearer benchmark for future record keeping and tax calculations.
One notable carve-out: the 30% minimum tax on capital gains will not apply to income support recipients, including Age Pension recipients.
This means Age Pension recipients selling investment property after 1 July 2027 would pay CGT at their marginal tax rate without the 30% floor applying, which may result in a lower tax outcome depending on their total income in the year of sale.
For retirees or investors who plan to sell in a year when their income is low enough to attract income support, this exemption may be relevant to long-term exit planning.
Rana said investors should think carefully about how the reforms fit into broader long-term financial goals.
“The reform doesn't change the long-term goal: building wealth efficiently and passing it on with as little friction as possible. It changes which paths get you there,” he said.
“Negatively geared established property used to be the default for high-income earners. It won't be. That doesn't make property bad. It makes the calculation different.”
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Why does the 2027 valuation matter?
Based on the proposed framework, investors may potentially have two ways to determine their property’s 1 July 2027 value:
1. A formal market valuation
This involves obtaining an independent valuation from a qualified property valuer around the transition date.
The valuation reflects the property’s actual market value at that time, considering:
local market conditions
renovations or improvements
comparable sales
location-specific demand
unique property characteristics
A formal valuation will not automatically produce a better tax outcome for every investor. Whether it is worthwhile will depend on the property, ownership structure, holding period and future sale plans.
2. The proposed ATO apportionment formula
The alternative option is a formula-based approach that estimates how much of the total gain accrued before and after the transition date.
Some tax professionals have raised concern that the formula assumes property values grow evenly over time, even though real property markets rarely behave that way.
Properties that experienced uneven growth, major renovations or strong suburb-specific price gains may be harder to assess accurately using a formula approach.
In those situations, a formula-based estimate may not fully capture the property’s actual value at 1 July 2027.
“For higher-value, unusual, or location-specific properties, a formal valuation by a qualified valuer will usually be more accurate,” Rana said.
He added that investors planning to hold property long term may benefit from thinking about valuations well before the deadline approaches.
“Make the valuation decision well before 1 July 2027, not in the year of sale. A valuation done in 2032 looking back to 2027 is harder to defend than one done at the time,” Rana said.
“This is a 2027 work item, not a 2032 one.”
For borrowers reviewing investment plans, understanding how the changes may affect future cash flow, servicing capacity and lending strategy could become just as important as the tax treatment itself.
What could this mean in practical terms?
To illustrate the difference between the two valuation methods in simple terms: imagine an investor purchased a property for $500,000 in 2015 and sells it in 2032 for $1,000,000. The total gain is $500,000.
If the ATO apportionment formula is used, it will estimate what proportion of that gain accrued before and after 1 July 2027 based on an assumed even growth rate over the full holding period. If the property actually grew unevenly. For example, rising sharply in value between 2020 and 2026 due to a suburb rezoning, the formula may assign more of the gain to the post-2027 period than actually occurred, potentially resulting in a higher tax liability.
A formal valuation obtained at the time would capture the actual market value at the transition date, giving the investor a more accurate and potentially more favourable split.
The difference between a formula estimate and a formal valuation may affect how much of the total gain is treated under the existing CGT rules versus the proposed new framework.
That does not automatically mean every investor will benefit from a valuation. Outcomes will depend on:
how long the property has been held
local market performance
renovation history
future sale timing
individual tax circumstances
But for some investors, particularly long-term holders or owners in strong-growth suburbs, a formal valuation may provide a more accurate record of value at the transition point.
This may become especially relevant for people who:
purchased well before 2027
substantially renovated their property
own property in high-demand locations
plan to hold the property for many more years
Centre for Independent Studies Chief Economist, Peter Tulip, said investors should avoid focusing too narrowly on tax settings alone.
“The negative gearing and capital gains tax calculations are two of 20 numbers that people should be plugging into their spreadsheets,” he said.
“They need to look at everything, and ultimately what they focus on is the bottom line, which is influenced by everything.”
Rana similarly cautioned against making property decisions based primarily on tax outcomes.
“A useful filter is: would I still buy this property if there was no tax benefit at all?” he said.
“If yes, the tax structure is a bonus. If no, you're letting the tax rule make a decision that should be made on cash flow, location, growth fundamentals, and your own circumstances.”
Existing investors may still be affected, even if they are grandfathered
One area causing confusion is the interaction between negative gearing grandfathering provisions and the proposed CGT changes.
Under the proposed reforms, some existing investors may continue accessing current negative gearing arrangements on properties purchased before 7:30pm AEST on 12 May 2026 (Budget night)
However, that does not necessarily exempt them from the proposed CGT transition rules.
In other words:
grandfathering may protect ongoing rental deduction treatment for properties held before 7:30pm AEST on 12 May 2026
for properties purchased after that date, rental losses on established residential properties can no longer be offset against other income such as wages, but unused losses are not lost entirely; they can be carried forward and offset against future residential property income, including capital gains
future capital gains will still need to be split on 1 July 2027 for all investors holding property across the transition date, regardless of whether they are grandfathered for negative gearing purposes
Investors holding property inside a self-managed superannuation fund (SMSF) or other superannuation structure should note that the proposed CGT changes do not apply to superannuation funds.
SMSFs will retain their existing CGT discount, currently a one-third reduction on capital gains for assets held more than 12 months, rather than moving to the new indexation and 30% minimum tax framework.
Similarly, the negative gearing changes do not affect superannuation structures. Investors with property in an SMSF should still confirm their position with a specialist adviser as implementation details may change before the reforms are legislated.
That means investors who assumed the reforms would not affect them at all may still want to understand how the CGT changes operate.
Hassan said the changes could still influence future investment behaviour and purchasing decisions.
“That will include whether future acquisitions are positively or negatively geared, how those acquisitions are structured, and also, at the margin, whether there are opportunities to make those acquisitions in newly built rather than existing dwellings,” he said.
For many Australians, this becomes less of a tax debate and more of a long-term financial planning question. How will the property fit into retirement plans, future borrowing needs, cash flow goals and eventual exit strategies?
“Diversification was always sensible. The reforms make single-asset-class concentration in residential property harder to justify than it was,” Rana added.
“For investors in their 30s and 40s rebuilding plans now, a structured mix of super, shares, business assets and property will be the answer, with proportions varying by individual circumstance.”
An Aussie Broker can help investors understand how proposed policy changes may affect borrowing structures, refinancing considerations and future investment capacity, while accountants and tax advisers can provide guidance on tax-specific implications.
Do you need to organise a valuation now?
Probably not immediately.
But tax professionals say investors may benefit from planning ahead rather than waiting until mid-2027 when demand for valuers could increase significantly.
Unlike many tax planning decisions that can be revisited later, the proposed CGT transition creates a fixed valuation date that may become harder to reconstruct accurately years down the track.
The practical timing window is likely to fall between late 2026 and mid-2027.
That may give investors time to:
speak with their accountant
understand whether a valuation makes sense for them
identify a qualified valuer
gather supporting documents such as renovation records and purchase details
Importantly, not all valuations are equal.
For tax purposes, the ATO generally expects a formal valuation from a suitably qualified independent valuer, rather than:
a real estate agent appraisal
an online estimate
a bank valuation prepared for lending purposes
Investors may also want to review broader financial arrangements ahead of the transition date, particularly if they hold assets through trusts or more complex ownership structures.
What should investors be thinking about now?
For many Australians, the proposed reforms may not require immediate action.
But they may be worth factoring into broader long-term property decisions, particularly for investors reviewing future refinancing plans, renovation decisions, retirement strategies or succession planning.
“They probably need to review their current arrangements, particularly with a view to any plans around the timing of realising capital gains, what that’s likely to cost tax-wise, and any strategies around acquisition going forward,” Hassan said.
Borrowing costs, repayment comfort, rental demand, long-term affordability and overall financial flexibility may ultimately matter more than a single policy change.
For Australians feeling uncertain about the reforms, Rana said a measured approach was important.
“The reforms haven't passed parliament, and the detail will move as exposure draft legislation lands,” he said. “Pause, get licensed advice, then decide.”
What should investors do before 1 July 2027?
For many investors, the reforms may not require immediate action. But there are several practical steps worth considering before the proposed transition date arrives.
1. Confirm your ownership and purchase details
The contract date of an investment property may become increasingly important under the proposed reforms, particularly when determining grandfathering eligibility and future CGT treatment. The key cutoff for negative gearing grandfathering is 7:30pm AEST on 12 May 2026. It is the contract date, not settlement date, that determines eligibility.
2. Review whether a formal valuation may make sense
Not every investor will need a formal valuation. But investors planning to hold property long term, particularly in high-growth areas or renovated properties, may want to discuss the option with their accountant well before July 2027.
3. Gather supporting records early
Renovation costs, improvement works, purchase documents and ownership records may become more important if future CGT calculations are reviewed years later.
4. Reassess cash flow and borrowing strategy
Investors may also want to consider how the proposed reforms could affect long-term cash flow, lending strategy and investment goals, particularly if relying heavily on tax deductions.
5. Avoid making rushed decisions
The reforms have been announced but are not yet legislated, and implementation details may still evolve. Many experts suggest investors avoid reacting emotionally before understanding how the changes apply to their own circumstances.
An Aussie Broker can help investors review borrowing structures, financing options and long-term lending strategy, while accountants and financial advisers can provide guidance around tax and investment implications.
