I bought my investment property years ago — if I sell after 1 July 2027, how is the gain taxed?

The apartment was bought years ago. It has done roughly what property in that suburb has done, the tenant is fine, and there was no plan to sell it any time soon. Then the headline arrives: the 50% capital gains tax discount is going. The instinct that follows is immediate, and potentially expensive — should it be sold before the change lands?

For most owners, the honest answer is that the change has been designed so it shouldn't drive that decision. But the way the gain will be worked out afterwards is genuinely new, and there is one thing worth attending to now.

What actually became law

On 12 May 2026, as part of the 2026–27 Federal Budget, the government announced reforms to negative gearing and capital gains tax. The ATO's guidance on the measures states plainly that they are now law — enacted through the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026. They apply from 1 July 2027.

From that date, for individuals, partnerships and trusts, the 50% CGT discount is replaced by two mechanisms working together. The first is cost base indexation: the original cost of the asset is lifted in line with the Consumer Price Index, so tax is paid only on the gain above inflation — broadly how the system worked between 1985 and 1999. It applies to all CGT assets, property and shares alike, held for at least 12 months.

The second is a minimum tax rate of 30% on real capital gains accruing from 1 July 2027. The word to hold onto is 'minimum'. It is a floor, not a new flat rate, and the Budget explainer notes it will not affect people whose capital gains are already taxed at 30% or more.

An asset you already own gets split in two

This is the part that matters most to anyone holding property or shares today, and it is the part the headlines skip.

There is no change at all for assets bought and sold before 1 July 2027. Assets purchased after that date sit wholly under the new arrangements. An asset you already own and sell later is treated in two parts: the current rules apply to the gain made up to 1 July 2027, and the new rules to the gain made after it.

In practice that means the 50% discount applies to the difference between the asset's cost base and its value at 1 July 2027. Indexation and the minimum tax are then used to calculate the tax on the gain accruing from 1 July 2027, using the asset's value at that date as the cost base for the second leg. Nothing is triggered on the day itself — there is no CGT event, nothing to report and no tax to pay until the asset is actually sold.

Which raises the obvious question: how does anyone establish what a property was worth on a date that has already passed? The value at 1 July 2027 is determined by the taxpayer as part of the tax return for the year the asset is realised, and there are two routes. You can seek a valuation of the asset as at 1 July 2027 — which for listed shares simply means the quoted price on the day — or you can use a specified apportionment formula that estimates the value from the asset's growth rate over the holding period. The ATO has said it will provide guidance and tools to support both.

One more transitional point for long-held assets: these arrangements also apply to legacy assets, including those purchased before 1985, and gains on pre-1985 assets accrued before 1 July 2027 continue to be exempt.

The two misreadings doing the rounds

The first is that there is a deadline to beat. There isn't one in the way people imagine. Because only gains accruing after commencement fall under the new arrangements, the gain built up to 1 July 2027 keeps its 50% discount whenever the asset is eventually sold. The Budget papers make the intent explicit — the transitional design means there is no incentive to buy or sell assets before that date. Selling a good asset early to beat a change that has been written not to catch it is how tax tails end up wagging investment dogs.

The second is that everyone will now pay 30% on gains. The 30% is a floor applied to the real gain after inflation has been stripped out, which is a smaller number than the gain on paper. Treasury's own comparison shows the point: had indexation been in place over the past 20 years, the effective discount would have ranged from 35% to 60% on average for typical assets held five or ten years, equating to an effective tax rate on the nominal gain of between 13% and 30%. Individuals may pay more or less than under current settings depending on their returns and how long they hold.

Worth stating too, because it is the question that comes up first: the main residence will continue to be exempt for CGT purposes. The four small business CGT concessions are also unchanged, and the existing 60% discount for qualifying affordable housing is fully retained. Recipients of means-tested income support such as the Age Pension or JobSeeker are exempted from the minimum tax if they receive any payment in the financial year in which they realise the gain.

So what is worth doing now, a year out? Records. Because the 1 July 2027 value has to be established later — possibly a decade later, in the return for the year you sell — the paperwork that supports it is the thing to protect. Contract of purchase, settlement date, purchase price, stamp duty and legal costs, and every receipt for capital improvements along the way. Whether a formal valuation or the apportionment formula produces the better outcome cannot be known until there is a sale price to compare against, so the sensible position is to keep both doors open rather than to guess now.

It is also worth putting a single diary note against 1 July 2027 rather than two. The negative gearing changes for established residential property start on the same day, under the same package, and owners of investment property will feel both.

This is general information current as at July 2026, not advice for your situation — how these rules land depends on what you own, how it is held and when you sell. Our investment property calculator is a reasonable place to see what a property does to your position year to year, and our service for property investors is there for the annual work.