Capital gains tax (CGT) has long turned on one number: what a property was worth at a particular point in time. In 2026 that question became more pressing for every Australian who owns an investment property, a holiday home or a former residence. The 2026-27 Federal Budget announced a reform to how capital gains are taxed from 1 July 2027, and legislation for it has now passed Parliament. This guide explains what has been announced, what the ATO has said about valuations and what is still undecided.
General information only. The rules are new, parts are still being finalised, and your tax position depends on your circumstances. Confirm the details with the ATO or a registered tax adviser.
What Is Changing From 1 July 2027
As described in Budget coverage and in the ATO's reform guidance, the 50% CGT discount for assets held longer than 12 months is replaced for future gains by a system of cost base indexation, combined with a minimum tax rate on net capital gains. Commentators report the minimum rate as 30 per cent. Some details, including how the changes apply to trusts and small businesses, were still being refined after the Budget, so the final settings should be checked against current ATO and Treasury material.
For assets you already own, the reform does not rewrite the past. Gains that accrued before 1 July 2027 are expected to keep the existing 50% discount, while gains accruing after that date fall under the new rules. That split is why the value of your property on 1 July 2027 has become a reference point.
Two Ways to Split a Gain
For property you hold on 1 July 2027 and later sell, the Budget material describes two options for working out how much of the gain belongs to each period:
- A valuation as at 1 July 2027. An independent market valuation fixes what the property was worth on the transition date. The gain up to that value is treated under the old rules and the gain after it under the new ones.
- An apportionment formula. This estimates the 1 July 2027 value or splits the gain based on how long the asset was held in each period. The ATO states the government is still developing the method and will publish guidance once it is enacted. The enabling legislation lets the Minister set the method by legislative instrument.
Descriptions of the formula differ between sources, so treat any specific example as provisional until the method is published.
Is a Valuation Compulsory?
No. According to the ATO's reform page, most people will not need the 1 July 2027 market value until they sell, and for 2026-27 tax returns they generally do not need it at all. The earliest return where it is likely to matter is 2027-28, and only if a sale happens in that year. The ATO has said it will publish guidance before the start date on how to determine values, which professionals to engage and what records to keep.
A valuation is therefore optional, but it may be worthwhile if the formula would not reflect your property's real growth. A house that was renovated heavily, subdivided or rezoned may have grown faster or slower than a formula assumes. A supported valuation lets you show the actual figure.
Timing and Type of Valuation
A valuation as at 1 July 2027 cannot be prepared before that date. It can be done afterwards as a retrospective valuation, where the valuer inspects today and uses historical market evidence to assess the earlier date. Valuation firms generally advise that the closer to the date a valuation is prepared, the easier it is to support, because memories, records and market data are fresher. There is no official deadline for ordering one, so you do not need to rush.
The ATO's guide to market valuations says a valuation should be objective and supported by appropriate evidence, and that the valuer must be suitably knowledgeable and experienced in the asset class. A report should identify the valuer and their qualifications, include a declaration of independence, state the valuation date, and explain the approach and evidence behind the conclusion. The guide lists recognised professional bodies such as the Australian Property Institute. Automated online estimates and agent appraisals are not designed to meet this standard.
Existing CGT Valuation Rules Still Apply
The 2027 reform sits on top of rules that already require valuations. For example, if you move out of your home and begin renting it, the ATO's main residence guidance says the property is treated as acquired at its market value on the day it first produced income, provided the change happened after 20 August 1996. The ATO recommends getting a professional market valuation at that time, because you will need the figure when you sell. Inherited property can also reset the cost base to market value at the date of death, which our guide to deceased estate valuations covers.
Practical Steps for Owners
- Keep your records. Purchase contracts, improvement invoices, renovation approvals and previous valuations all help a valuer and your accountant.
- Do not rely on estimates. Online value tools and price guides do not meet the ATO's evidence standard.
- Wait for the ATO's guidance. Watch the ATO's CGT reform page for the valuation guidance and apportionment method before deciding.
- Talk to your accountant. They can model whether a valuation is likely to save tax on your property.
- Choose a qualified valuer. Ask for a certified practising valuer who understands tax-purpose and retrospective valuations.
If you would like to talk through a date-specific or retrospective valuation, see our services or contact the team.
