The CGT Changes Are Coming. Here Is Exactly What They Mean for Your Investment Property.

On 12 May 2026, the Federal Government handed down a budget that changed the rules for Australian property investors. The most significant change is the reform to capital gains tax.

From 1 July 2027, the 50% CGT discount that has applied to assets held longer than 12 months is gone. In its place comes cost-base indexation and a 30% minimum tax rate on real gains.

If you own investment property, are considering selling, or are thinking about buying, understanding exactly how these changes affect your position is very important.

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What Is Actually Changing

The current system is straightforward. Hold an asset for more than 12 months and the ATO taxes only 50% of your capital gain. If your property grew by $200,000, you pay tax on $100,000 at your marginal rate.

From 1 July 2027, that changes to indexation. Your purchase price is uplifted by CPI over the holding period. Only the gain above inflation is taxed. This is how CGT worked in Australia between 1985 & 1999 before the Howard government introduced the 50% discount.

In addition, a 30% minimum tax rate now applies to real gains accruing after 1 July 2027. Even in a low-income year where your marginal rate might be lower, you will not pay less than 30% on those gains.

For property investors in a moderate growth environment, the practical difference between the old 50% discount and the new indexation model is relatively small. If your property grew 6% and inflation ran at 3%, you pay tax on the 3% real gain rather than 50% of the 6% nominal gain. The outcomes are broadly similar.

The bigger impact is for high-growth assets, shares, businesses, or properties in markets that significantly outpace inflation, where the gap between nominal and real gains is large.

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How the Transitional Rule Works

Assets bought before 1 July 2027 and sold after are not simply caught by the new rules. There is a transitional arrangement that splits your gain at 1 July 2027.

Here is how it works:

The ATO uses a market value at 1 July 2027 as the split point. Gains accrued up to that date are taxed under the existing 50% discount. Gains accrued after that date are taxed under indexation with the 30% minimum floor.

You can either obtain a formal valuation as at 1 July 2027 or use the ATO's apportionment formula, which back-calculates the split from your actual growth rate over the holding period.

The practical implication is that the longer you have held your property before 1 July 2027, the more of your total gain falls under the favourable 50% discount rather than the new indexation rules.

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What Is Not Changing

Before making any reactive decisions, it is worth being clear about what the budget did not touch:

• The main residence exemption remains fully intact
• SMSFs and superannuation funds are excluded from both the CGT and negative gearing changes
• Small business CGT concessions are all retained
• The 60% CGT discount for affordable housing is retained
• Widely-held managed investment trusts are unaffected
• Companies are excluded from the CGT changes

If you hold investment property inside an SMSF, nothing changes for that structure. If your primary concern is your family home, the main residence exemption continues unchanged.

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Negative Gearing: The Connected Change

The CGT reform does not sit in isolation. It sits alongside the removal of negative gearing on established properties purchased after 12 May 2026.

From 1 July 2027, losses on established residential properties bought after that date cannot be deducted against wages or salary income. They carry forward and offset future property income only.

Properties exchanged before 7:30pm on 12 May 2026 are fully grandfathered. 

Negative gearing applies to those properties for as long as you hold them.

New builds retain access to negative gearing under the new rules.

The combined effect of the CGT and negative gearing changes reshapes the after-tax economics of established property investment in a meaningful way. Not fatally, but enough to make structure and asset selection more consequential than they were before May 2026.

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Model Your Position With the Search Property CGT Calculator

To help investors understand exactly how these changes apply to their specific situation, the team at Search Property has built a CGT calculator that models your sale under both the current rules and the new 2027 rules side by side.

You enter your purchase date, sale date, purchase price, sale price, and annual income. The calculator applies the ATO's apportionment formula to split your gain at 1 July 2027 and shows you the after-tax proceeds, tax payable, and after-tax return under both regimes.

Here is an example using Treasury's own modelling assumptions:

• Investment property purchased 1 July 2025
• Sold 1 July 2029
• Purchase price: $446,429
• Sale price: $560,000
• Annual income: $200,000
• Inflation assumption: 2.5%

Under current law, tax payable is $26,689 with after-tax proceeds of $533,311 and an after-tax return of 4.55% per year.

Under the new transitional rules, tax payable increases to $28,892 with after-tax proceeds of $531,108 and an after-tax return of 4.44% per year. The difference is $2,203 in additional tax on this specific sale.

For a four-year hold in a moderate growth scenario with a transitional split, the impact is real but manageable. The calculator allows you to adjust holding period, growth rate, income level, and inflation assumptions to model your own position accurately.

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What This Means for the Decisions You Are Facing Right Now

If you are considering selling an existing property: Gains accrued to 1 July 2027 are still taxed under the 50% discount. If you are planning to sell within the next 12 to 18 months, the transitional rule means a significant portion of your gain is still taxed favourably. Run the numbers on both sides before making a decision based on the headline change alone.

If you are considering buying established property: The negative gearing restriction applies from 1 July 2027 for established properties bought after 12 May 2026. Between now and 30 June 2027, losses on new established purchases can still be deducted against wages. That window is narrowing.

If you are considering structure: Bucket companies were not touched by the budget and continue to offer genuine flexibility. SMSFs remain unaffected. If you have not reviewed your ownership structure since the budget, now is the time. The right structure depends on your income, your goals, and how you plan to build. Getting it wrong under the new rules is more costly than it was before.

If you are a long-term holder: For investors with no plan to sell, the CGT change has limited practical impact on your day-to-day position. The grandfathered negative gearing on existing properties remains intact. The value of holding quality assets in supply-constrained markets compounds regardless of the tax treatment at the eventual point of sale.

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The Bottom Line

The 2027 CGT changes are significant. They are not the end of property investment as a wealth-building strategy for Australians.

Property in supply-constrained markets with long-term demand drivers still compounds. Rental income still flows. The structural housing shortage that has underpinned Australian property values for decades has not been resolved by a tax change.

What has changed is the margin for error. The premium on getting the asset selection, the structure, and the timing right has increased. Investors who approach these changes with the right advice and the right framework will continue to build wealth through property. Those who make reactive decisions without understanding the full picture will find the new environment more costly.

Use the calculator. Model your position. Make decisions based on your actual numbers rather than the headline.

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Want to Understand How These Changes Apply to Your Portfolio?

At Search Property, we help Australians cut through the noise and build data-driven investment strategies aligned with long-term wealth goals. Our buyers agents have helped thousands of clients build wealth through property because we focus on fundamentals, not headlines.

Book a FREE investment assessment call with Search Property. We'll discuss your goals, model the new rules against your position, and help you build a clear plan to move forward with confidence.