Updated 10 October 2026
From 1 July 2027 every affected CGT asset is deemed sold and reacquired at market value, splitting your gain between the old 50 per cent discount rules and the new indexation regime. You can set that split with a market valuation or with Treasury's apportionment formula, released as an exposure draft on 3 August 2026. For property, the formula assumes one steady compounding growth rate from purchase to sale, and property almost never grows that way.
At a glance
- From 1 July 2027 assets are deemed disposed and reacquired at market value under Subdivision 112-E
- Owners can instead elect the apportioning method under subsections 112-155(3) and 112-165(3)
- Treasury released the apportioning formula as an exposure draft on 3 August 2026; it is not yet registered
- The formula ignores when growth actually happened; a valuation captures it
- Properties that grew early favour a valuation; late growers and high original purchase prices may prefer the formula
In this guide
Why your gain gets split
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026, enacted 26 June 2026, replaces the 50 per cent CGT discount for individuals, trusts and partnerships with CPI cost base indexation plus a 30 per cent minimum tax from 1 July 2027. Gains that accrued before that date keep the old treatment; gains after it use the new rules.
What happens to the discount on each side of the split is set out in CGT discount changes from 1 July 2027.
The mechanism is a deemed disposal and reacquisition under Subdivision 112-E: every affected asset held at the end of 30 June 2027 is treated as sold just before 1 July 2027 and immediately bought back. The pre-reform gain is locked in under the old rules and deferred until you actually sell. The line between the two eras is the asset's market value at 1 July 2027, and everything turns on where that line is drawn.
The two methods
- Market valuation. A valuation of the property as at 1 July 2027, prepared from comparable sales evidence around that date. This fixes the split at what the asset was actually worth.
- The apportioning method. Sections 112-155(3) and 112-165(3) allow an election to use an apportioning method set by legislative instrument. Treasury released the exposure draft of that instrument on 3 August 2026. It does not split the gain by time. It divides your sale price by your original purchase price, converts that into a single daily growth rate, and compounds it over every day you owned the property. The value it lands on for 30 June 2027 becomes your cost base from 1 July 2027.
Note
The formula is a draft, and it only sees your purchase priceConsultation on the exposure draft closed on 21 August 2026 and the instrument is not yet registered, so the detail can still move. Two features are already clear. The growth rate is worked out from the first element of the cost base only, the purchase price, so renovations and other improvements are invisible to it. And because it compounds, it assumes most of your growth arrived late, which is the opposite of what happened in most Australian markets between 2020 and 2025.
The compounding problem
The apportionment formula assumes your property grew at one steady compounding rate from the day you bought it to the day you sell. Real property does not behave that way. Values move in bursts: a rezoning, a renovation, an infrastructure announcement, a boom in your suburb, followed by flat years. Compounding loads growth into the later years, so wherever your growth was front-loaded before 1 July 2027 the formula assigns a 30 June 2027 value below what the property was worth, shifts gain out of the discounted era into the new regime, and you pay more tax than the asset's history justifies.
The CGT calculator puts a number on that for your own market. Pick the capital city or rest-of-state area, house or unit, and the year you bought, and it shows the tax under both methods with every step of the working.
The reverse is also true. If your property was flat before 2027 and boomed after, the formula flatters you, and a valuation would hurt. That is why this is a genuine decision, not a default, and why it should be made with your accountant asset by asset.
Worked example
Note
Worked example on the exposure draft methodLisa bought an investment house on 1 July 2017 for $600,000. Her suburb ran hard through 2021 to 2026, and a valuation supports $1,050,000 at 1 July 2027. She sells on 1 July 2032 for $1,200,000, with $135,000 of other taxable income that year. CPI is taken at 2.5% a year.
Valuation method. $450,000 of gain sits before 1 July 2027 under the 50 per cent discount. After indexing the $1,050,000 cost base, only $11,961 of real gain remains after the reset. Total tax on the gain: $106,972.
Apportionment formula. Sale price divided by purchase price is 2.0 times. Over 5,480 days of ownership that is a daily growth rate of 0.01265%, and compounding it over the 3,652 days to 30 June 2027 assigns the property a value of $952,280, which is $97,720 below what it was worth. Only $352,280 of gain gets the discount. Another $122,528 lands in the new regime. Total tax on the gain: $135,974.
The formula costs Lisa $29,002 more tax, against a report that cost $297. A straight line between her purchase and sale prices would have landed about $50,000 below her true value. Compounding lands nearly $100,000 below it, which is why the exposure draft method bites harder than the early commentary expected.
For the full picture of what the reform alters beyond the split, including who is affected and what is untouched, see our guide to the capital gains tax changes from 1 July 2027.
Hold property across 1 July 2027?
Book a market valuation at the reset date and keep both methods open. $297 residential, $595 commercial, incl GST, prepared by a Chartered Accountant and Certified Property Valuer, 24 to 48 hours, Australia-wide.
Start your orderHow it worksWho wins with which method
| Your situation | Likely better method | Why |
|---|---|---|
| Strong growth before 2027 (boom suburbs, renovated, rezoned) | Valuation | Locks the accrued gain into the discounted era |
| Flat before 2027, growth expected after | Formula | Compounding pushes later growth back into the discounted era |
| Pre-1985 property | Valuation | The 1 July 2027 market value becomes the cost base for the first time; there is no meaningful ownership-period spread to apportion in your favour |
| Uncertain, holding long term | Get the valuation, decide later | The election is made at sale; the valuation preserves both options |
Timing: the choice is later, the evidence is now
Nothing forces you to lodge anything by 30 June 2027. The method choice is made when you eventually sell, which could be decades away. But the evidence has a shelf life. A valuation prepared close to 1 July 2027, while that quarter's comparable sales sit in the databases in full detail, is cheaper and stronger than a retrospective valuation commissioned in 2035 defending a 2027 figure. And because the election preserves optionality, the owner who holds a dated valuation can pick whichever method wins at sale time; the owner who holds nothing can only take the formula.
The properties in scope: investment, commercial and trust-held property, part-income-producing homes, and pre-1985 assets, which enter the CGT net for post-2027 growth for the first time. The fully exempt family home stays out of all of this. Full coverage on our 1 July 2027 valuation page and, for pre-CGT owners, the pre-CGT valuation guide.
Common questions
How do I value my property at 1 July 2027?
With a market valuation prepared from comparable sales evidence around that date, consistent with the ATO's market valuation guidance. A desktop valuation by a Certified Property Valuer commissioned near the date is the cleanest evidence; a retrospective valuation can reconstruct it later at the cost of thinner evidence.
What is the ATO apportionment formula?
An alternative to a valuation, allowed by sections 112-155(3) and 112-165(3), set by legislative instrument. Treasury released the exposure draft on 3 August 2026. It divides your sale price by your purchase price, converts that to a daily growth rate, and compounds it over every day of ownership to fix a value for 30 June 2027. It does not split by time, it ignores improvements, and because it compounds it penalises assets that grew strongly before 2027.
Do I have to get a valuation by 30 June 2027?
No deadline applies; the method election is made when you sell. But a valuation dated at 1 July 2027 and obtained near that time is stronger and cheaper than reconstructing the figure years later, and holding one preserves your ability to choose whichever method produces less tax.
Is the 2027 CGT change actually law?
Yes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. The indexation regime, the 30 per cent minimum tax and the 1 July 2027 deemed disposal are enacted; the apportionment formula's legislative instrument was released as an exposure draft on 3 August 2026 and is not yet registered.
Sources
- Treasury, Capital gains tax and negative gearing tranche 2 legislation consultation, including the CGT apportioning method exposure draft
- Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Federal Register of Legislation
- ATO, Tax reform: reforming negative gearing and capital gains tax
- ATO, Market valuation for tax purposes
