The change in one paragraph. The May 2026 Federal Budget replaces the 50% CGT discount with cost-base indexation, adds a 30% minimum tax on net capital gains, and gives investors in newly built residential property a one-time choice between the new and old rules. The main residence exemption is untouched. The new rules apply to individuals, trusts and partnerships from 1 July 2027. For most established investment portfolios, the after-tax return on sale will be lower — and how you split a future gain across 1 July 2027 will quietly become the most important CGT decision you make.
Quick reference — what changes for property investors
Two things matter most. One: if you're buying a new build after 1 July 2027, the choice between the old and new rules is a planning decision worth real money. Two: for every property you already own, you'll need a defensible market value at 1 July 2027 to split future gains under the new rules.
1. The four changes, in plain English
1. Indexation replaces the 50% discount. Hold a property longer than 12 months and the cost base lifts each year with CPI. You're taxed on the real gain — the part above inflation — not the full nominal gain less 50%. This is the system Australia ran before 1999.
2. A 30% minimum tax floor. If your marginal rate produces an effective rate below 30% on the gain, a top-up applies. Designed to stop investors timing a sale into a low-income year (e.g. after retirement) to access the 14% bracket (the bottom personal rate from 1 July 2027 onward, after the second Stage 3+ cut). Means-tested income support recipients are carved out.
3. Pre-CGT property enters the net. Any property — residential, commercial, or rural — acquired before 20 September 1985 will be taxed on growth after 1 July 2027. Pre-July 2027 growth remains exempt. Relevant for investors with inherited, family-trust-held, or long-held property of any type.
4. New residential builds — the investor's choice. Buy a newly-built dwelling, an off-the-plan apartment, or a duplex replacing a single dwelling, and at sale time you choose either the new indexation/30%-floor system or the legacy 50% discount. The choice doesn't pass to a subsequent buyer — so resale value of the choice itself is zero.
Gains on existing properties accrued before 1 July 2027 continue to qualify for the 50% discount. The reforms are prospective.
2. The new-build carve-out — why it matters
This is the single planning lever the Budget hands property investors. From 1 July 2027:
- Buy an existing established dwelling → new rules (indexation + 30% floor) automatically.
- Buy an eligible new build → choice between old and new rules at the time of sale.
What qualifies as an "eligible new build"
To access the choice, the property must genuinely add to housing supply. Per Budget materials, this covers:
- Off-the-plan apartments that have been newly constructed.
- Duplexes (or similar) built through a knock-down rebuild that replace a single freestanding house — i.e. two dwellings where there was one.
- Any residential construction on previously vacant land (house-and-land packages, owner-built dwellings).
- A newly-built property occupied for less than 12 months before its first sale — i.e. you can buy a brand-new dwelling from the original developer or builder and still qualify, provided it hasn't been lived in for a year.
What's not eligible (on current materials): substantial renovations to an existing dwelling, granny flats added to an existing property, or any acquisition of a dwelling already lived in for more than 12 months. The test is supply-side — the property must add a net new dwelling to the market.
Why the choice has real value
Indexation only beats the 50% discount when inflation runs hot relative to capital growth. For high-growth pockets — inner-city apartments, well-located townhouses — the 50% discount almost always produces a better outcome. For low-growth or hold-for-yield assets, indexation can edge it.
The catch: the choice doesn't transfer to the next buyer. A new build sold by the original investor under the 50% discount becomes a "used" property for the buyer — they're stuck with the new rules. Expect this to shape resale pricing.
For investors planning purchases in 2027–2030, the new-build carve-out tilts the buy decision meaningfully toward off-the-plan, house-and-land, and knock-down-rebuild — independent of the macro property cycle.
3. The 1 July 2027 valuation — two methods, one decision at sale
For every property you own on 1 July 2027, you'll eventually need a market value at that date to split future gains into a pre-reform portion (eligible for the 50% discount) and a post-reform portion (indexation + 30% floor). The ATO will accept two methods:
- Formal market valuation by a qualified valuer. Defensible. Best outcome where growth was front-loaded into the pre-2027 period. Can be done retrospectively — a valuer using comparable sales evidence from on or around 1 July 2027 can produce a valuation years later, and the ATO routinely accepts these for CGT purposes.
- Straight-line apportionment formula. The ATO will publish a formula that spreads the total gain by days held pre- and post-1 July 2027. Free. Mathematically blunt — ignores when growth actually happened.
You don't need to commission valuations on 1 July 2027 itself. The practical decision point is when you sell — at that point, you (or your accountant) run the numbers under both methods and pick the better one. For an investor whose property grew 80% between 2015 and 2027 and was then flat for three years, the formula would still attribute a chunk of the gain to the post-2027 period — a retrospective valuation prevents that. For a property where growth has been more even, the free formula may be fine.
What does help to do now: keep records of comparable sales and rental yields around mid-2027 for each property — agent appraisals, RP Data/CoreLogic reports, local sales evidence. A valuer producing a retrospective valuation in 2032 will lean on this material, and it's much harder to reconstruct later.
If you'd like, we can prepare a general valuation report for your property — a desktop appraisal based on comparable sales evidence as at 1 July 2027 — at the time you need it. For smaller or less material gains, a general report is normally sufficient. For higher-value or commercial property, we'll usually recommend a formal valuation by an API-registered valuer for audit defensibility.
4. Worked example — a $1.5M Sydney investment property
A property investor bought a Sydney investment unit in July 2015 for $800,000. Market value at 1 July 2027 is projected at $1.3M. They sell in July 2030 for $1.6M. Marginal rate at sale: 47% (top bracket including Medicare).
Under the old regime (hypothetical):
- Gain = $1.6M − $800K = $800K
- 50% discount → $400K assessable
- Tax at 47% = $188,000
Under the new regime — split at 1 July 2027:
Pre-1 July 2027 portion (50% discount preserved):
- Gain = $1.3M − $800K = $500K
- 50% discount → $250K assessable
- Tax at 47% = $117,500
Post-1 July 2027 portion (indexation + 30% floor):
- Sale proceeds attributable to this slice = $1.6M − $1.3M = $300K
- Indexed cost base: $1.3M × (1 + 3 yrs CPI at 3%/yr) ≈ $1.42M
- Assessable gain = $300K − ~$120K indexation = ~$180K
- Tax at 47% (well above the 30% floor) = $84,600
Total tax under new regime: ~$202,100
vs old regime: $188,000
Effective increase: ~7.5% on this trade.
The increase looks modest because most of the growth happened pre-2027 and is preserved under the 50% discount. Sell the same property in 2035 with a higher post-2027 growth rate and the differential widens sharply. The longer you hold past 2027, the more the new system bites.
What the example also shows: indexation only helps if inflation is high relative to growth. For sought-after locations, the 50% discount was almost always more generous than CPI indexation will be.
5. The 30% floor — who it actually hits
The 30% minimum tax has been called an "anti-avoidance" measure. In practice for property investors:
- Top-bracket (47%) and mid-bracket (37–39%) investors: unaffected. Marginal rate already above 30%.
- Lower-income or retired investors planning to sell a property in a low-income year: materially affected. The play of timing a sale to access the 14% or lower brackets is now capped at 30%.
- Pensioners and other income-support recipients: carved out completely.
There's also a sharper edge case worth flagging. A taxpayer earning under $45,000 a year who is not on income support will pay a higher rate on their capital gain than on their salary. Wages in that band attract just 14% (from 1 July 2027); the capital gain is floored at 30% — more than double. That hits part-time workers, semi-retirees not yet on the Age Pension, students with an inherited property, and casual or gig-economy earners with a one-off CGT event. The carve-out only catches recipients of means-tested income support — not everyone on a low income.
For the typical property investor with PAYG salary and 1–3 rentals, the 30% floor will rarely change the answer. It matters most for investors planning to sell after retirement and before reaching pension age — and for low-income earners crystallising a one-off gain.
6. What's untouched — and what to do with that
The carve-outs are as important as the changes.
Main residence exemption. Untouched. The family home remains the most tax-effective long-term store of wealth for owner-occupiers.
SMSF property. The 33⅓% discount in accumulation phase and 0% tax in pension phase stay. The relative tax advantage of holding property in super widens after 1 July 2027. Worth a fresh look at SMSF property strategies and LRBAs — within their already-tight regulatory perimeter.
Small business CGT concessions. All four (15-year exemption, 50% active asset reduction, retirement exemption, rollover) retained. If your commercial property qualifies as an active asset of a small business, the planning playbook is unchanged.
60% affordable-housing discount. Retained in full. Worth a fresh look for investors with appetite for the NRAS-style structure.
Companies. No CGT discount currently; none after 2027 either. But pre-CGT goodwill in a private company that owns property is in scope — if your trading company has unrecognised pre-1985 goodwill bundled with property, get advice.
7. What property investors should do before 1 July 2027
A short, prioritised list.
- List your properties by acquisition date. Tag anything pre-20 September 1985 separately — it's now a planning target.
- Keep mid-2027 comparable-sales evidence on file. You don't need a valuation done on 1 July 2027 itself — retrospective valuations are accepted. But save the data a future valuer will need: agent appraisals, CoreLogic / RP Data reports, local sales evidence around that date. Easier to file now than reconstruct in 2032. Linix can prepare a general valuation report for your property as at 1 July 2027 when you need it — sufficient for most residential investment properties and smaller gains.
- For purchases planned in 2027–2030, lean toward new builds. The optional 50% discount on new-build resale is a real, quantifiable benefit not available on established stock.
- Don't rush a panic sale to "lock in" the old regime. Existing properties keep the 50% discount on pre-July 2027 growth automatically. Selling early just to access the old rules normally crystallises tax that could otherwise be deferred — and adds transaction costs you don't get back.
- Review SMSF property strategy. Super's relative position has improved. Where the regulations and your trustee duties allow, super becomes a more compelling long-term wrapper for property.
- Re-look at distributions from property-holding trusts. Long-running discretionary trusts holding appreciated investment property need a fresh distribution and resolution plan to avoid distributing 30%-floored gains to lower-income beneficiaries.
- Stay close to the Bill. Measures are announcements until enacted. Final legislation may shift on valuation methodology, transitional rules, and the new-build perimeter.
Talk to us
If you own investment property — particularly multiple properties, commercial property, or property held in a trust or SMSF — the 1 July 2027 reforms reshape every sale you make from that date onward. Book a 30-minute property CGT review to map your portfolio against the new rules and identify which holdings benefit from new-build planning, SMSF restructuring, or simply better record-keeping ahead of 1 July 2027.
This article is general information based on the May 2026 Federal Budget announcement (FY26). Measures are subject to enactment and may change before the 1 July 2027 commencement date. It isn't tax advice for your specific situation. Talk to a registered tax agent — like us — before acting.
