Recent Capital Gains Tax (CGT) changes have left many property investors concerned that they should sell before the new rules take effect. However, a closer look suggests many investors may be misunderstanding how the changes work. In fact, for many property owners, rushing to sell could be an unnecessary and potentially costly decision.
Existing gains are protected
One of the most important points investors are overlooking is that all capital growth accumulated up to 1 July 2027 will continue to receive the existing CGT treatment. Properties will be valued as at 1 July 2027, and any gain accrued up to that date will still benefit from the current 50% CGT discount available to individuals and trusts. This protection applies regardless of when the property is ultimately sold. In other words, investors do not lose the benefit of the existing CGT discount simply because they hold the property beyond 1 July 2027.
This is particularly relevant in markets such as Perth, where many investors have experienced significant capital growth over the past five years. Selling before 2027 does not preserve a benefit that would otherwise disappear. See the scenario below as an example.
Scenario
Note: These are round numbers just to show how the rules work.
- You bought an investment property in 2011 for $450,000
- It’s worth about $1,050,000 today (2026)
- Your total gain so far =$600,000
- You’re on the top marginal tax rate (assume ~47%)
Option 1 — You sell before 1 July 2027
The current rules apply to the whole gain.
| Amount | |
|---|---|
| Total capital gain | $600,000 |
| Less 50% CGT discount | -$300,000 |
| Taxable gain | $300,000 |
| Tax at ~47% | ~$141,000 |
Option 2 — You sell after 1 July 2027
The property keeps growing in value and you sell in 2030 for $1,300,000. The gain is now split into two periods.
Part 1 — Growth up to 30 June 2027 (protected)
| Amount | |
|---|---|
| Value at 30 June 2027 | $1,050,000 |
| Gain 2011 – 30 June 2027 | $600,000 |
| Less 50% discount (old rules still apply) | -$300,000 |
| Taxable | $300,000 |
Part 2 — Growth from 1 July 2027 – 2030 (new rules)
| Amount | |
|---|---|
| Sale price 2030 | $1,300,000 |
| Growth after 1 July 2027 | $250,000 |
| CPI/Inflation adjustment (illustrative) | -$164,153 |
| Real gain taxed | $85,847 |
Your big $600,000 gain from the last 15 years keeps the 50% discount — it doesn’t get penalised just because you held on. Only the new $250,000 of growth after July 2027 uses the new inflation-indexation method with the 30% minimum tax. Note the 30% minimum tax applies only to gains after indexation, not the total gain.
Future growth receives indexation benefits
Another commonly misunderstood aspect of the proposed changes is that the new CGT regime applies only to future gains above the property’s indexed value after 1 July 2027. Each year, the property’s cost base will be adjusted for inflation, meaning a portion of future capital growth will effectively remain tax-free.
For example, if a property is worth $1 million on 1 July 2027 and inflation is 3.5% over the following year, the first $35,000 of growth would be offset through indexation. According to the information provided, investors experiencing moderate growth rates after 2027 may actually pay less tax on future gains than they would under the current 50% discount model.
Selling means giving up future income growth
Tax should never be considered in isolation from overall investment performance. The infographic highlights an expectation that rental growth could accelerate over the coming years as fewer investors enter the market. Reduced investor participation may further constrain rental supply, creating conditions that support higher rents.
For many investors, the ongoing income generated by a well-located property could significantly outweigh any perceived tax advantage from selling early.
Some benefits cannot be recreated
For investors holding established properties, there is another consideration. The proposed policy settings may mean that negative gearing benefits available today cannot be replicated in the future on similar established properties. Once a property is sold, that opportunity may be lost permanently.
This means the decision to sell should be based on your long-term investment objectives, cash flow requirements and portfolio strategy, rather than a response to tax reform.
The bigger picture
The CGT changes are more nuanced than many headlines suggest. Existing capital gains remain protected, future gains benefit from indexation, rental markets may strengthen, and some investment benefits could become difficult to replace.
For many investors, holding their property may provide more flexibility and more time to plan an optimal exit strategy rather than rushing to sell. A rushed sale, particularly one driven by misunderstanding, could prove far more expensive than the tax changes themselves.
This article is general information only and is not tax advice. Investors should seek advice from their accountant or financial adviser regarding their individual circumstances.
