Capital Gains Tax Changes: What Property Investors Need to Know
The Federal Government has passed significant reforms to Australia's Capital Gains Tax (CGT) system as part of its broader housing affordability package.
If you own investment property—or are thinking about buying one—here's what you need to know.
What's Changing?
From 1 July 2027, the current 50% Capital Gains Tax discount for individuals, trusts and partnerships will be replaced with a new system based on inflation indexation, together with a minimum 30% tax on capital gains.
The reforms are designed to reduce tax concessions for investment properties while encouraging investment in newly built housing.
What Happens to Existing Investment Properties?
The good news for current investors is that existing investments will be grandfathered.
This means gains that have accrued before 1 July 2027 will continue to be calculated under the existing CGT rules, including eligibility for the current 50% discount where applicable. The new rules will generally apply only to gains that accrue after the commencement date.
How Will the New System Work?
Instead of automatically receiving a 50% discount after holding an asset for more than 12 months:
The cost base of the asset will be adjusted for inflation.
Tax will generally be payable on the "real" capital gain after indexation.
A minimum 30% tax on capital gains will apply under the new framework.
The practical outcome will vary depending on how long you've owned the property and the level of inflation over that period.
What About New Residential Properties?
One important exception is newly constructed residential property.
The Government has indicated that eligible investors purchasing new builds will continue to receive concessional treatment, with the ability to choose between the existing 50% discount and the new inflation-based calculation. This is intended to encourage additional housing supply.
Why Is the Government Making These Changes?
The reforms form part of the Government's broader housing policy aimed at:
Improving housing affordability.
Redirecting investor demand towards new housing construction.
Reducing tax concessions for existing residential investment properties.
These CGT reforms accompany changes to negative gearing and new restrictions on SMSF borrowing for residential property.
What Does This Mean for Investors?
Every investor's situation is different, but now is an ideal time to review your long-term investment strategy.
If you're planning to:
purchase an investment property,
restructure your portfolio,
establish an SMSF, or
sell an existing investment,
It's worth understanding how these changes may affect your future tax position.
Capital Gains Tax (CGT) Changes
The broader tax reforms have a later commencement date.
Commencement: 1 July 2027
The existing 50% CGT discount will be replaced by the new system from this date, subject to the final legislation and any grandfathering provisions that apply.
We're Here to Help
At Best Foot Forward Mortgage Solutions, we help clients structure lending strategies that align with their long-term financial goals.
While we don't provide taxation advice, we work closely with accountants and financial advisers to ensure our clients understand how lending decisions may interact with changing tax legislation.
If you're considering your next property purchase or reviewing your investment strategy, we'd be happy to discuss your lending options.
Shona Stephenson
Principal Mortgage Broker
Best Foot Forward Mortgage Solutions Pty Ltd
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