Capital gains tax on investment property: the 2027 changes

Capital gains tax (CGT) is the tax on the profit you make when you sell an investment property. Since 1999, individuals who held a property for at least 12 months have been able to halve that profit before tax. From 1 July 2027, that 50% discount is replaced by two things: adjusting your cost for inflation, and a 30% minimum tax on the gain.

The change is law, and it doesn't only affect property — it applies to shares and other assets too. This guide covers how CGT works on a property, what's changing, who ends up paying more or less, and how the transition works if you own a property on 1 July 2027.

How CGT works on an investment property

When you sell, your capital gain is the difference between what you receive and your cost base — broadly, what the property cost you to buy, hold and sell. The cost base includes:

• the purchase price
• stamp duty and legal fees on the purchase
• capital improvements, such as an extension
• the costs of selling, such as agent's commission

Anything you've claimed as a tax deduction can't also go in the cost base, and the capital works deductions you've claimed reduce it.

For CGT, the sale happens when you sign the contract, not when you settle. That decides which financial year the gain falls in — and which rules apply to it.

Your net capital gain is added to your taxable income for that year and taxed at your marginal rate. A capital loss can't reduce your salary, but it can be carried forward against future capital gains.

The rule that applies until 30 June 2027

If you're an individual or a trust and you've owned the property for at least 12 months, you reduce the gain by 50% before it's added to your income. Super funds get a one-third discount, and companies get none.

The example ignores capital works deductions, which would reduce the cost base and increase the gain.

What changes from 1 July 2027

For individuals, partnerships and trusts, two changes apply to gains that build up from 1 July 2027.

1. Indexation replaces the 50% discount

Instead of halving the gain, you increase your cost base in line with inflation (the Consumer Price Index), in a similar way to the rules that applied between 1985 and 1999. Only the gain above inflation is taxed. Treasury says the ATO will provide guidance and tools to work out the adjustment.

Like the discount, it only applies to assets held for at least 12 months.

2. A 30% minimum tax on real gains

Real capital gains that build up from 1 July 2027 will be taxed at a rate of at least 30%. If your marginal rate is already 30% or more, this changes nothing for you.

It matters for people with a low taxable income in the year they sell — for example, someone who has retired and plans to sell then because their tax rate is lower. That timing strategy is now worth much less.

People who receive a means-tested income support payment, such as the Age Pension or JobSeeker, at any time in the year they make the gain are exempt from the minimum tax.

Will you pay more or less?

It depends on how fast the property grows compared with inflation.

• If growth comfortably beats inflation, indexation leaves more of the gain taxable than the 50% discount did, so you pay more.
• If growth barely beats inflation, indexation can leave little or nothing taxable, so you pay less.

Treasury modelled three investors who each buy a $500,000 asset in July 2027, hold it for ten years, earn $100,000 a year in other income, and see 2.5% inflation.

Treasury describes 5% as similar to long-term returns on residential property. Its analysis of the past 20 years suggests indexation would have worked out to a discount of around 36–42% for an average house held for five or ten years — less generous than 50%.

If you own a property on 1 July 2027

You don't lose the discount on the growth you've already had. The gain is split in two:

• Before 1 July 2027: the growth from your cost base up to the property's value on 1 July 2027 keeps the 50% discount.
• After 1 July 2027: the growth from that value onwards is taxed under indexation and the minimum tax, using the 1 July 2027 value as the new cost base.

You work out the 1 July 2027 value when you sell, in that year's tax return. You can either get a valuation as at 1 July 2027, or use an apportionment formula that estimates the value from the property's growth across the whole time you've owned it. That formula isn't final: Treasury released it as a draft legislative instrument for consultation in August 2026.

Because the formula assumes steady growth, a property that grew faster before July 2027 than after it may be better served by a valuation. If you expect to own property on that date, ask your tax agent now whether a valuation near 1 July 2027 is worth getting.

If you're buying now

A property bought today will have almost all of its growth after 1 July 2027, so plan on the new rules. Two things work in your favour:

• Carried-forward rental losses. If you buy an established property and it runs at a loss, those losses are quarantined from 1 July 2027 — but they can reduce a capital gain on residential property when you sell. See negative gearing after the 2026 Budget.
• The new build choice. If you buy a new build, you can choose the 50% discount or the new method when you sell. Under the Budget design a later buyer of that home can't, though the final definition of a new build is still being settled. See new build or established?

What hasn't changed

• Your home. The main residence exemption continues. If you move out and rent your former home, you may be able to keep treating it as your main residence for up to 6 years under the ATO's rules.
• Selling before 1 July 2027. Assets bought and sold before that date are taxed under the current rules.
• Affordable housing. The existing 60% CGT discount for qualifying affordable housing stays.
• Capital losses can still be carried forward against future gains.

Common questions

Does this apply to shares as well?

Yes. The change applies to all CGT assets held by individuals, partnerships and trusts, including shares. The negative gearing change, by contrast, only applies to residential property.

What about my SMSF?

The new CGT method applies to individuals, partnerships and trusts. Super funds aren't on that list and keep their existing treatment. See buying property through an SMSF.

What records should I keep?

Everything that makes up the cost base: the contract, stamp duty and legal costs, receipts for capital improvements, and your depreciation schedule. The ATO asks you to keep property records for 5 years after you sell. If you'll own the property on 1 July 2027, keep any evidence of its value at that date too.