Capital Gains Tax Property Valuation: What Owners Need To Know

Australia’s Capital Gains Tax (CGT) rules are changing from 1 July 2027, affecting existing property investors and  homeowners who may rent out their property in the future. One of the most important steps investment property owners can take is to obtain a professional CGT Property Valuation around 1 July 2027. This guide explains the 2027 CGT changes, how Cost Base Indexation works, when you’ll need a valuation, and how a Depreciation Schedule can help reduce your future Capital Gains Tax.

That May 2026 Budget certainly got Australian property investors talking – mostly about negative gearing, Capital Gains Tax and the need for a Capital Gains Tax  property valuation.

Remember, newly built residential properties, commercial properties and properties wholly owned in self managed super funds are not affected by the budget changes and can still benefit from the ‘old’ CGT rules.

It is timely now to take a look at the May 2026 changes and especially why CGT Property Valuations will be important on July 1, 2027. 

Key Points

1. 1. Capital Gains Tax rules change on 1 July 2027 – property investors who purchase a residential property after this date will no longer be entitled to the 50% CGT discount when they sell the property.
2. 2. Most existing property owners should consider obtaining a CGT Property Valuation by a registered valuer around this transition date.
3. 3. Cost Base Indexation will become increasingly important when calculating future Capital Gains Tax.
4. 4.Renovations and improvements may reduce your CGT liability if properly documented.
5. 5. A professionally prepared Depreciation Schedule can help support Cost Base calculations and maximise long-term tax outcomes.
6. 6. Newly built residential properties, commercial properties and properties wholly owned in self managed super funds are exempt from these changes.
7. 7. Negative gearing for existing properties is still available, however, the losses can only be claimed against other property income. 

What was the change to CGT announced in the May 2026 budget?

 From 1 July 2027, the rules around calculating Capital Gains Tax (CGT) will change for property investors who exchange contracts on residential properties after that date.

The rules will also affect people who already own properties before that date – even the home they currently live in – if there is a chance they will rent it out down the track.

Property investors who enter into a contract to buy a residential property AFTER 1/7/27 will not be entitled to the 50% CGT discount when they sell the property and will be subject to a minimum of 30% CGT. A different regime – Cost Base Indexation – will be in place and we explain that below.

Properties owned before 1/7/27 are ‘grandfathered’. That means owners of those properties whenever they sell them are still entitled to the 50% CGT discount if they choose for gains made up until July 1, 2027. Alternatively, they can opt to calculate their CGT using Cost Base Indexation.

The benefits of applying the 50% CGT discount vs calculating capital gain using Cost Base Indexation in the future are impossible to predict, so all property owners will likely seek a market valuation from a registered valuer around July 1, 2027 – the ‘transition date’.  

Why will it be important to have a property valued on July 1, 2027?

The importance purpose of CGT Property Valuations on properties you already own will ensure that you quarantine, or lock in, Capital Gains made on the property from when it was purchased up until July 1, 2027, the ‘transition date’. These pre 1/7/27 gains will be eligible to have the 50% CGT discount applied to them if you choose.

These CGT Property Valuations will need to be done by a registered valuer, not a real estate agent or anything like that. And it will be better to get these Valuations done as close to the transition date as possible, even if you have no intention of selling the property. People say all the time, ‘Oh, I’m never selling…’ But life changes and often plans need to as well.

You know the phrase ‘better safe than sorry’? Getting a CGT Property Valuation by a registered valuer done around July 1, 2027 will be so much better than scrambling around, say, three years down the track and trying to get a retrospective Valuation. 

Who will need to get a CGT Property Valuation on July 1, 2027?

It is not just people who have owned an investment property and been renting it out for a while. They will of course need to get a CGT Property Valuation.

What about people who have been living in their home and have recently made it available to let or are possibly planning to? Yep, they should get CGT Property Valuation. 

People who have inherited a property? Yep, again. It will be important for the property they have inherited to have a CGT Property Valuation when they assume ownership of it.

Properties acquired in a settlement? They will need a value put on them upon transfer.

And there will be other scenarios – there always are.

The message is, if in doubt, get a CGT Property Valuation. For a modest investment, you could save yourself a disappointing CGT bill down the track.   

How are Capital Gains calculated under the ‘old rules’?

As we wrote above, people who owned properties before July 1, 2027 and still entitled to the 50% CGT discount on capital gains made up until July 1,2027.

There are probably whole seminars on how to calculate CGT, but in very general terms the Cost Base of the Asset needs to be established. In the case of an investment property, this is what you paid for the property.

This is easy if it was a completed property that you bought.

The Cost Base for a property can include legal costs and stamp/transfer duty and some other expenses – the higher the cost base is, the less CGT you pay.

Improvements you make to the property can also be added to the Cost Base – a Depreciation Schedule can help capture these and be useful to a valuer.

At the other end of the equation is the sale price of the property minus legals, agent commission, advertising and some other costs – the more you can reduce the total sale price the better. 

The gap between your cost base and the adjusted sale price is your profit or Capital Gain and that is what you pay tax on. But as noted above, if you have held the property for over one year, that gain can be reduced by 50%.

And that gain is added to your taxable income in the year the property is sold.

Phew.

Here is a very basic example:

How will Capital Gains made after July 1, 2027 be treated?

From July 1, 2027, the ‘transition date’, capital gains on properties will be taxed using a Cost Base Indexation method. We mentioned that above, so now it’s time to roll our sleeves up and explain it.

This change in the method for calculating CGT will apply to properties bought very recently and the capital gain made after July 1, 2027 on properties that have been owned and rented out for some time. 

Property investors who have owned properties for some time will be able to take advantage of the 50% CGT discount for gains made up until July 1, 2027. Gains made after that will be subject to Cost Base Indexation.

Not getting a CGT Property Valuation on properties already owned before the ‘transition date’ will likely disadvantage you when it comes to CGT calculations down the track. This is because Cost Base Indexation in many cases will be less generous than the 50% CGT discount.

For properties bought after July 1, 2027, the CGT Property Valuation will be the purchase price. That’s easy.

How does Cost Base Indexation work?

So you buy a property after July 1,2027 and some years down the track the property is sold – hopefully for a profit.

As in the ‘old days’ you will have the Cost Base as a starting point. This is the purchase price plus stamp duty and legals. And you will have the termination value i.e. the sale price minus advertising, commission, legal etc So you will know what your Capital Gain is. No change there. 

The change is in how that gain is taxed.

A thing called Cost Base Indexation will be applied to the Cost Base of the property. That Cost Base will be increased in line with inflation using the CPI. The idea is that you will pay CGT on the gain in value of the property above inflation.

Let’s say you buy a property for $600,000 including stamp duty etc after July 1, 2027. Then you sell it five years later and net $900,000. You have made a gain of $300,000.

What happens then is that Cost Base Indexation will be applied to the original $600,000 purchase. Let’s say the CPI averages 4% per year. And let’s assume this will  be applied cumulatively – that would make sense.

That starting $600,000 x 4% = $24,000

$624,000   x   4 % =  $24,960

$648,960   x   4% =  $25,958

$674,918   x   4% =  $26,996

$701,915   x   4% =  $28,076  

$729,991   = Indexed Cost Base.

So the Capital Gain is adjusted  from $300,000 to $170,000 and that is what you pay tax on i.e. that $170,000 is added to your income in the year you make the gain.

Here it is in a table:

There will also be a minimum of 30% tax payable on the capital gain. This is to stop clever property investors contriving to sell Assets in years when they can show little other taxable income.

And remember, Cost Base Indexation is not just applied to capital gains made on properties purchased after July 1,2027. It applies to the gain made after July 1, 2027 on properties owned before then. 

How do renovations affect CGT calculations?

Improvements you make to a property can be added to the Cost Base. This has always been the case, but many people have not realised it.

This is where a Depreciation Schedule can help. Those improvements made to a property, whether they were done when it was owner occupied or a rental, need to be captured. These improvements can increase your property’s Cost Base, potentially reducing the amount of CGT payable when you sell your property. 

Lots of the Depreciation Schedules we do have renovations in them, making them an essential tool for Property Valuers. 

This makes a Depreciation Schedule an important long-term tax planning tool for Australian property investors. You can read more on Depreciation Schedules here. 

Which properties are exempt from the changes to CGT?

This brings us almost full circle to the reasons for these big changes to negative gearing and Capital Gains Tax.

In an attempt to boost supply, individuals who invest in brand new residential properties are allowed to negatively gear them AND they can still benefit from the 50% CGT discount – providing they hold those properties for at least a year.

Brand new apartments and brand new houses all qualify. But if you plan to do a knockdown and rebuild, two dwellings need to be built where there was originally one – this adds to the supply.

Commercial properties are of course exempt from the changes, as are those bought by a SMSF – provided the SMSF did NOT need to borrow money to buy the property. You can read more about depreciation and Commercial properties here. 

Why investing in existing properties still makes sense 

There is something a lot of people have overlooked with these changes to CGT and negative gearing. When they were announced, people threw their arms up in the air and said, ‘Well, there is no point investing in existing properties anymore.’ 

That is not the case at all. And as less informed investors look only to new builds and prices soften on existing properties, better informed investors will be moving in on those existing properties.

First up the CGT changes. Yes, the 50% CGT discount for properties acquired after May ?, 2026 is no longer available. But Cost Base Indexation still reduces the CGT payable upon sale of a property. In some cases, Cost Base Indexation will work out better for people. We explained the calculations here.

But what about Negative Gearing? It is still available – that’s what people have overlooked. It’s just that the losses can only be claimed against other property income. So that can be a benefit to people with more than one investment property – especially if they have a positively geared property.

Even if investors don’t have other property income to put losses against, losses that were previously able to be claimed under the old negative gearing rules get quarantined to be used later.

Yes, that’s right. That negative gearing entitlement gets deferred. For how long, you ask? Until the property is sold. Then you use those deferred negative gearing benefits to reduce your CGT. It’s delayed gratification. 

Frequently Asked Questions About Capital Gains Tax Changes

Do I need a property valuation before 1 July 2027? 

Yes, if you own your own property in Australia, you should get a Property Valuation as close to 1 July 2027 as possible. This may help reduce Capital Gains Tax on your property should you choose to rent it out in the future. 

Can a real estate agent provide a CGT valuation?

Real Estate Agents can only provide a market appraisal for your property that can help you gauge what your property might sell for in the current market. 

Only a certified property valuer can provide a Property Valuation that is legally binding and recognised by the ATO. 

Do owner-occupied homes need a valuation?

Owner-occupiers should also get a Property Valuation as close to 1 July 2027 as possible. People who have been living in their home and recently made it available to let, or are planning to, will need a Property Valuation. Even if property owners are not currently thinking of turning their property into an investment property, circumstances change. And when it does, that Valuation may come in handy.

What happens if I don’t get a valuation?

If you don’t get a valuation for your property, a retrospective valuation can be prepared. A retrospective valuation must be prepared by a certified property valuer. .

Questions about CGT or CGT Property Valuations?

Get in touch with our team. Call 1300 660 033 or email enquiries@depreciator.com.au.