Rental property capital gains tax
Capital gains tax on an investment property in Australia
Whether a recorded value at 1 July 2027 helps you turns on how unevenly your property grew. The calculator below runs both splits on the same figures.
- The protected share, explained
- Uneven growth is the deciding fact
- Calculator on this page
Uneven growth is the norm for a rental property, which puts the 1 July 2027 split in play for an investor.
The change for an investor
A rental bought years ago and sold years from now produces one gain that the reform cuts in two. Everything that accrued before 1 July 2027 keeps its 50% discount treatment, while what builds up afterwards is taxed with an indexed cost base and a minimum rate of 30%. See the 2027 capital gains tax changes for the reform in full.
An investor does not have to sell, refinance or alter anything for the split to happen. Owning the property across 1 July 2027 is enough.
Investment growth is rarely steady
The split is set primarily by the property's market value at 1 July 2027, or by the ATO's time-apportionment formula. The formula assumes the property grew at one steady rate across every year of ownership, and investment property often behaves nothing like that.
- A renovation or a subdivision can lift value inside a single year.
- A rezoning or a new transport line reprices a whole suburb at once.
- A long flat stretch after purchase followed by a fast run is about as far from steady growth as a property gets.
Where the real path departs from steady growth, the two ways of splitting a gain give different answers. Close to steady, they converge and the choice barely matters.
When a recorded value helps, and when it does not
A recorded market value at 1 July 2027 beats the ATO formula only where the property grew faster before that date than its own average across the whole ownership period. Front-loaded growth means more of the gain genuinely sits on the protected side than a steady rate would credit.
Where growth before 1 July 2027 lagged the property's own average, the ATO formula gives the better result, and a paid report would be money wasted. Our free CGT calculator runs both splits on the same figures, so you can test that before you spend anything.
A portfolio is tested one property at a time
The comparison is a property-level question and not an owner-level one. Across several holdings bought at different times, some may be better served by the ATO formula and others by a recorded value at 1 July 2027, so one answer applied to every property will be wrong somewhere.
A property bought close to 1 July 2027 is a case of its own. Little of the gain sits before the date, and the 50% discount in any event requires the asset to have been held for at least 12 months.
What kind of evidence the situation calls for
Two levels of evidence exist for a market value at a past date. A Property Value Estimate Report is an automated estimate for an owner's own planning. It is not a professional valuation and no certified practising valuer signs it. The certified valuation is the tier a certified practising valuer countersigns, and an SMSF audit or an ATO position will be looking for it. How it works covers both tiers and the order path.
Timing
A value as at 1 July 2027 cannot be established until the date has passed. An order placed before 1 July 2027 is a booking: you pay now, and the report is finalised once the date has passed.
Compare both ways of splitting your capital gain
There are two ways to split a capital gain across 1 July 2027. This compares them on your own numbers, so you can see whether paying for a recorded market value would leave you better off - or whether the ATO formula already does.
ATO time-apportionment method
Estimates the value at 1 July 2027 as if the property grew at one steady rate from purchase to sale. No valuation needed.
Estimated CGT--
- Gain treated as pre-2027
- --
- Gain treated as post-2027
- --
Market-value method (with a recorded valuation)
Splits the gain on what the property was actually worth at 1 July 2027.
Estimated CGT--
- Gain treated as pre-2027
- --
- Gain treated as post-2027
- --
Fill in the figures above to see the comparison.
What this model assumes
- Your property moves at a flat 7% a year from what it is worth today: to 1 July 2027 (forward while that date is ahead, back once it has passed), and to the sale unless you enter your own sale price. Real growth is never flat, and the comparison is sensitive to that.
- The ATO formula follows the government exposure draft of August 2026: it assumes one steady compounding growth rate from purchase to sale and reads the value at 1 July 2027 off that curve. The draft is not final, and the formula may change.
- So the two methods only part ways when growth was uneven. A property that grew at a steady rate gets the same answer from both; one that grew faster early on does better with a recorded market value.
- The pre-2027 share of the gain is taxed on half of it at your marginal rate, which is the current 50% discount.
- The post-2027 share is taxed on the gain above the value at 1 July 2027, with that value raised by inflation, assumed at 2.5% a year. Each method uses its own value at 1 July 2027.
- A 30% minimum tax is applied to the post-2027 share, so a rate below 30% is lifted to 30% on that share. It is not applied to the pre-2027 share.
- One rate is applied to the whole gain. In a real return the gain is added to your income for the year and can span more than one bracket.
- Years are counted whole: a year you pick is read as 1 July 2027 in that year. The real formula counts days, so a purchase or sale close to 1 July 2027 can split differently.
- Ignored entirely: cost-base additions and selling costs, capital works deductions, the main-residence exemption and partial exemptions, ownership splits, and carried-forward capital losses. Properties acquired before 20 September 1985 are not modelled.
- Figures are rounded to the nearest 100 dollars.
Illustrative estimates only. Not tax, legal or financial advice. The rules described are simplified - confirm your position with your accountant.
1 July 2027 - CGT discount rules change
Gains accrued before 1 July 2027 keep the 50% discount. Splitting a gain across that date is done primarily by the property's market value on the day, or by the ATO's apportionment formula.
Counting down to 1 July 2027.