When it comes to CGT for property investment, the sale price is only part of the equation. When you sell, how long you’ve held the property, what you’ve spent on it and even the structure you own it through can all influence the final tax bill.

With changes coming from 1 July 2027, now is a good time for property investors to understand where they stand. A decision that makes sense from a property perspective may look very different once the tax implications are factored in.

That doesn’t mean you need to rush to sell before the deadline. It means you need to know your numbers before making your next move.

In this guide, we break down how CGT works for property investors, what’s changing in 2027 and the key factors worth reviewing before you buy, hold, restructure or sell.

How CGT Applies to Property

Capital Gains Tax is not a separate tax with its own fixed rate. When you sell an investment property at a profit, the net capital gain is added to your assessable income for that year and taxed at your marginal rate. Understanding this distinction matters, because the gain can push you into a higher tax bracket even if the rest of your income is modest.

The CGT event for real estate typically occurs when you sign the sale contract, not at settlement. If you sign in June and settle in July, the gain is reported in the year of the June contract. This detail alone can catch many investors off guard.

Capital losses must be applied before the discount. If you have carried-forward capital losses from other assets, they reduce the gain first, and the discount applies only to what remains.

What Is Changing From 1 July 2027

The Australian Government has announced reforms that will materially change how capital gains on assets sold after 1 July 2027 are treated. These are separate reforms from the negative gearing changes, though both take effect from the same date and can affect the same property.

What is being replaced: The 50% CGT discount for individuals, trusts, and partnerships will be replaced with CPI cost-base indexation and a 30% minimum tax rate applied to real capital gains accruing after 1 July 2027.

What is being retained: The main-residence exemption, small-business CGT concessions, and the existing 60% affordable-housing discount remain in place.

The transitional rules: If an eligible property is owned before 1 July 2027 and sold later, the gain will generally be divided into a pre-reform component and a post-reform component. The pre-reform component retains the 50% discount, while the later component is calculated using the new indexation method. Taxpayers are expected to be able to use either a valuation as at 1 July 2027 or the prescribed apportionment method. A contemporaneous valuation may provide useful evidence, but it is not necessarily mandatory in every case.

Eligible new residential builds may receive special treatment, including the ability to choose between the existing 50% discount and the new indexed cost-base approach.

A simplified comparison:

Whether selling before or after 1 July 2027 produces a better outcome depends entirely on the numbers specific to your property: purchase date, expected sale price, holding period, ownership structure, and usage history. There is no universal answer.

Common CGT Misconceptions That Cost Investors Money

Property investors often carry assumptions about CGT that are incorrect. Some of these misunderstandings can lead to poor timing decisions, missed deductions, or unexpected tax bills.

What Counts Toward Your Cost Base

Many investors underestimate their cost base and therefore overestimate their taxable gain. Understanding what can be included is directly relevant to how much CGT you pay.

Your cost base for CGT property generally includes:

• • The purchase price
  • Stamp duty and legal costs on acquisition
  • Capital improvements made during ownership
  • Certain ownership costs incurred while the property was not income-producing
  • Selling costs such as agent’s commission and legal fees at disposal

What generally cannot be included:

• • Amounts already claimed as tax deductions
  • Capital works deductions claimed or claimable generally reduce the cost base.
  • Depreciating assets may also require separate balancing-adjustment treatment, so the building, land and depreciating assets should not automatically be treated as one CGT calculation.
  • Repairs and maintenance expenses that were deductible in the year incurred

A practical example: Suppose you purchased a property for $650,000, paid $30,000 in stamp duty and legal costs, spent $40,000 on a qualifying capital improvement, and paid $20,000 in selling costs. Your cost base is $740,000. If the property sells for $1,000,000, the capital gain before the discount is $260,000, not $350,000. Keeping accurate records throughout ownership can make a material difference.

Note, there are qualifications:

• • The $30,000 must consist of eligible acquisition costs, not simply every amount paid at purchase.
  • The $40,000 improvement must not already have been claimed as a deduction, and capital works deductions claimed or claimable may need to be excluded from the cost base. The ATO specifically confirms that capital works deductions claimed or claimable can reduce the cost base.

An amount already claimed as a deduction cannot also be included in the cost base. Depreciation and capital works claims may reduce the cost base even if you did not actively claim them. This is why your depreciation records and CGT records need to be reviewed together before sale, not treated as unrelated. Our post on maximising rental property deductions covers the distinction between deductible expenses and capital costs in more detail.

Who Is Most Affected by the Reforms

Not all property investors face the same level of exposure. The investors with the most to consider are those who combine recent purchases, established properties, high gearing, and a long expected holding period.

How Ownership Structure Affects Your CGT Outcome

The entity through which you hold an investment property can materially change the CGT result, the rate at which the gain is taxed, and whether special concessions apply.

Individual ownership generally attracts the 50% CGT discount for properties held at least 12 months under current rules. The discounted gain is taxed at the individual’s marginal rate. Individual ownership may also qualify for the main-residence exemption, the six-year absence rule, the affordable-housing additional discount, and small-business CGT concessions where relevant conditions are met.

Company ownership generally receives no CGT discount. If a company makes a $1,000,000 capital gain on a property held for more than 12 months, the full gain is taxable at the company rate. Extracting profits from a company then creates further tax consequences for shareholders. Companies also generally cannot access the main-residence exemption. Company ownership can still be useful for asset protection or business structuring, but those benefits need to be weighed against the CGT cost for a long-term capital-growth property. If you are reviewing your current structure, our small business restructure service covers the key considerations around entity changes.

Trust ownership can generally access the 50% CGT discount where the assets and trust satisfy the requirements. The gain may then be streamed to beneficiaries who are assessed at their own rates. However, a trust is not simply a “discount vehicle.” The deed must permit the relevant distribution; the trustee must make and document the required resolutions, and distributing to minors, non-residents, or entities can have special consequences.

SMSF ownership attracts a one-third CGT discount for assets held at least 12 months, rather than the individual 50% discount. Capital gains on assets supporting retirement-phase income streams may qualify as exempt current pension income, subject to the fund’s pension-phase calculations and whether the asset was actually supporting the pension during the relevant period. SMSFs also face strict restrictions: residential property generally cannot be lived in or rented by members or related parties, borrowing arrangements are tightly regulated, and losses cannot be used against members’ personal income. For SMSF-specific guidance, the team at our SMSF accountant service can assist with structuring and compliance questions.

A critical point on restructuring: Ownership structure should generally be settled before acquisition. Changing ownership immediately before a sale to chase a better CGT outcome risks creating a new CGT liability and stamp-duty cost that exceeds any expected saving. A late transfer is not automatically effective.

From 1 July 2027, the structure question becomes more important, not less. Companies already generally lack the individual 50% discount, so their relative position changes differently. Individuals and trusts need to model the pre- and post1 July 2027 portions of any gain. SMSFs retain their separate superannuation treatment.

Commercial vs Residential

Commercial property transactions can create GST issues that do not usually arise in the same way for ordinary residential investment property. Depending on the circumstances, a sale may involve taxable-supply rules, the margin scheme or GST-free going-concern treatment. The outcome depends on the property’s use, the seller’s enterprise and GST registration, the contract, the purchaser’s status, and whether the requirements for a going concern are met. The contract should clearly address GST, including whether the price is GST-inclusive and whether the margin scheme or going-concern treatment is intended.

The basic CGT framework applies to both property types, but the practical differences are significant.

• • Negative gearing reform: The announced restriction on offsetting rental losses against salary and unrelated income is specifically directed at established residential property. Commercial property is not affected in the same way.
  • CGT reform: The new CGT rules apply broadly across CGT assets held by eligible individuals, trusts, and partnerships. Commercial property held by these owners can also be affected by the post-1 July 2027 changes.
  • GST: This is where commercial and residential transactions diverge most significantly. Ordinary residential rent is input-taxed: no GST is charged, and GST credits generally cannot be claimed on related costs. Commercial rent is generally taxable for a registered landlord. When selling, existing residential premises are generally sold without GST. A commercial sale is generally taxable if the seller is registered, subject to arrangements such as the margin scheme or a GST-free going-concern sale.
  • Going-concern sales: A fully leased commercial building, including its leases and operating arrangements, may qualify as a GST-free going-concern sale where both parties are registered and agree in writing, and the seller carries on the leasing enterprise until the sale. A property sale alone is not sufficient. As an example, a leased commercial building sold for $2.2 million may involve a substantial GST component if the sale is taxable. The contract must clearly address whether the price is GST-inclusive, whether the margin scheme applies, and whether the parties intend a going-concern treatment. Our post on what it means for a business to be a going concern provides useful background on the concept as it applies in practice.

Residential property is more directly affected by the negative-gearing restriction. Commercial property typically raises more complex GST and going-concern issues. Both are subject to the proposed CGT changes for gains accruing after 1 July 2027.

A Pre-Sale Review is the Start of CGT Minimisation Strategy

If you are already thinking about selling, speaking to an adviser before appointing an agent or signing any contract is where the real value is created. A thorough pre-sale review models your situation across multiple scenarios so you can make an informed decision rather than guessing.

Here are the scenarios a good adviser will typically work through:

• • Sell now versus sell later. Comparing a contract signed before 1 July 2027 against one signed after, and modelling what holding for another year or several years would produce. The answer is not automatically “sell before the reform.” A later sale may produce a higher price, additional rental income, and more deductions that outweigh the tax difference.
  • Sell versus retain and refinance. For an investor managing cash flow, comparing selling and paying CGT now against retaining the property and accepting lower tax benefits from 1 July 2027, or refinancing to reduce debt servicing pressure.
  • Established property versus new build. If you are considering selling one property and buying another, modelling whether an established dwelling or an eligible new build would produce the better after-tax outcome, including transaction costs, stamp duty, depreciation, rental yield, and expected growth.
  • Main-residence and former-home scenarios. If the property was previously your home, testing the full exemption, partial exemption, and the six-year absence rule, and whether another property was treated as your main residence during the same period.
  • Capital-loss timing. Whether carried-forward capital losses, other asset disposals, or a lower-income year could reduce the taxable gain in ways that change the decision.
  • Net cash after all costs. The actual cash available after loan repayment, break costs, agent commission, legal fees, CGT or income tax, and settlement adjustments. Investors sometimes have a substantial taxable gain but much less cash than expected after repaying debt and paying selling costs.
  • Development or trading-stock risk. Determining whether the sale is genuinely on capital account. A property bought, subdivided, or developed with a profit-making purpose may produce ordinary income rather than a capital gain, meaning no CGT discount and no main-residence exemption. This is particularly relevant if you have subdivided land, built or substantially renovated for resale, or repeatedly bought and sold property.

When Should You Speak to a Professional?

The short answer is: before buying, while holding, and before selling.

• • Before buying is the most valuable moment. Ownership structure, property type, and usage are difficult and expensive to change later. An adviser should model the different ownership options, expected cash flow, GST treatment, and the effect of the 2027 changes before you sign the purchase contract.
  • While holding is where most investors leave value on the table. Advice should not be limited to the annual tax return. Tracking capital improvements separately from deductible repairs, maintaining a dedicated CGT file, and reviewing the cost base annually ensures nothing is missed when the time comes to sell. An amount that is not deductible immediately may still matter to the cost base calculation years later.
  • Before selling is where timing and structure decisions are made. Obtain advice before appointing an agent. The CGT event generally occurs at contract signing. A pre-sale review should cover estimated gain and available losses, the cost base and any missing records, main-residence or six-year absence issues, GST and going-concern issues for commercial property, the pre- and post-1 July 2027 CGT treatment, and whether a valuation at the reform date is needed. Our post on selling your rental property and capital gains tax walks through the key steps in more detail.

How far in advance? Three to six months is a solid general timeframe for a standard investment property. Six to twelve months is appropriate if the property involves a trust, company, SMSF, commercial property, potential GST, former-home complications, a large expected gain, or a sale that may cross the 1 July 2027 CGT transition.

If the property is already listed, contact your adviser immediately, before signing. There may still be time to reconstruct the cost base, locate depreciation schedules and improvement invoices, review the GST wording in the contract, and calculate an estimated tax liability. Once the contract is signed, some timing options disappear.

Minimise CGT on Your Property Investment With Rhythm Financial

The CGT rules are complex enough under the current framework. The 2027 reforms and transitional rules add further layers that most investors will not be able to navigate effectively on their own. Running the numbers across scenarios, with someone who understands your specific structure and situation, is the difference between an informed decision and an expensive one.

If you have an investment property and are uncertain how the upcoming changes affect your position, the team at Rhythm Financial can work through the detail with you. Get in touch to start the conversation before it costs you more than it should.

Frequently Asked Questions

Does the CGT discount apply if I sell before 1 July 2027?

If you sign the sale contract before 1 July 2027 and have held the property for at least 12 months, the existing 50% CGT discount applies to the full gain for eligible individuals and trusts. The new rules apply only to gains accruing from 1 July 2027 onwards.

What is the cost base and what can I include?

The cost base for cgt property is your starting point for calculating the gain. It generally includes the purchase price, stamp duty and acquisition legal costs, eligible capital improvements, certain holding costs incurred while the property was not income-producing and selling costs. You generally cannot include amounts already claimed as deductions. Depreciation and capital works claims may reduce the cost base, which is why reviewing these records before sale is important.

How does selling investment property capital gains work through an SMSF?

A complying SMSF generally receives a one-third CGT discount for assets held at least 12 months, rather than the individual 50% discount. Capital gains on assets supporting a retirement-phase pension may qualify as exempt current pension income, subject to the fund’s specific pension calculations. However, an SMSF is subject to strict restrictions on residential property: members and their related parties generally cannot live in or rent the property, and losses stay within the fund rather than offsetting members’ personal income.

Can I transfer a property to a family member or trust before the reforms to get a better CGT outcome?

A transfer is generally treated as a disposal at market value, even if no cash changes hands. This can trigger a CGT event and stamp-duty consequences on the transfer itself, before you have even reached the sale. Any restructuring needs to be modelled carefully against the expected saving, and in most cases should be done before acquisition rather than immediately before sale.

What is the six-year absence rule and how does it apply to selling investment property capital gains?

The absence rule allows a former main residence to continue being treated as your main residence for up to six years while it is rented, subject to conditions. You generally cannot apply the exemption to another property during the same period. The rule does not provide a blanket exemption: if the property was rented for part of the ownership period, only a partial exemption may apply, and the cost base may need to be determined by reference to the property’s market value when it was first used to produce income.

What is the difference between a capital gain and ordinary income for property?

If you purchased, subdivided, or developed a property with a profit-making intention, the profit may be taxed as ordinary income rather than a capital gain. In that case, the 50% CGT discount and the main-residence exemption may not be available. This is a common risk for investors who have subdivided land, built or substantially renovated for resale, or have a pattern of buying and selling property. Establishing which account applies is one of the first questions a pre-sale review should address.

Are commercial properties affected by the 2027 CGT changes?

Yes. The proposed CGT reforms apply broadly to eligible individuals, trusts, and partnerships holding any CGT asset, not only residential property. However, the negative-gearing restriction announced for established residential properties does not apply to commercial property in the same way. Commercial property also raises distinct GST issues, including the going-concern provisions, that require separate analysis before sale.

Understanding CGTfor property investment has never been more important than it is right now. The reforms scheduled for 1 July 2027 will change the calculation for many investors, and the decisions made in the lead-up to that date, on timing, structure, and record keeping, can make a significant difference to the outcome. Getting professional guidance to model your specific situation is not an optional step. It is the most direct way to ensure you are not paying more than you need to.