Changes In Capital Gains Tax

My online news and social media feeds have been full of humour and sarcasm around this week's budget. I've seen commentary around the “Robin Hood” style wealth redistribution, and the government trying to solve housing affordability while also raising taxes and spending heavily.

The proposed Capital Gains Tax (CGT) is one of the biggest talking points for investors and property owners.

Currently,
if you own an investment property or asset for more than 12 months, you receive a 50% CGT discount. This means only half of the profit is taxed when you sell.
For example:


• Buy for $800,000

• Sell for $1,200,000
• Profit = $400,000
• Under current rules, only $200,000 is added to your taxable income.

HOW IS CAPITAL GAX TAX changing from 1 July 2027?

The Government has proposed removing the 50% CGT discount from 1 July 2027 and replacing it with an inflation-indexed system.

In simple terms, instead of automatically receiving a 50% discount, your gain would only be reduced by inflation, meaning investors could pay significantly more tax when selling assets.

The changes are proposed to apply mainly to: investment properties, shares, trusts, and other investment assets.

Family homes (principal place of residence) are expected to remain exempt.

The Government says the changes are designed to reduce speculative investing, improve housing affordability,  and redirect investment toward new housing supply.

However, critics argue that investors may leave the market, fewer rentals may be built, and housing supply could tighten further.

One of the biggest concerns from accountants and investors is that these reforms could fundamentally change how Australians build long-term wealth through property and investment.

So, should you sell your investment property before 1 July 2027?

Not necessarily. For many investors, selling purely to avoid a potential future CGT change could actually create unnecessary tax, transaction costs, and loss of long-term wealth growth.

A lot will depend on:

• whether the proposed reforms actually become law,
• the final wording and transition rules,
• whether existing assets are “grandfathered,”
• the investor’s income and tax bracket,
• holding structure (personal name, trust, SMSF, company),
• and long-term strategy.

What many investors are likely to consider instead is restructuring and wealth-preservation strategies rather than panic selling.

Some common strategies investors may explore with their accountant or financial adviser include:

• Holding assets longer
If the market continues to grow strongly, some investors may simply hold quality assets long term and avoid triggering CGT altogether.

• Debt recycling and equity strategies
Rather than selling, investors may access equity to purchase additional assets or reduce non-deductible debt.

• Buying higher-yielding assets
If future capital gains become more heavily taxed, investors may shift focus toward:

• stronger rental yield,
• dual income properties,
• commercial property,
• or cash-flow-positive investments.

• Using trusts or company structures
Some investors may reconsider ownership structures for future purchases:

• discretionary trusts,
• bucket companies,
• SMSFs,
• or corporate entities.
  Each has different tax implications and asset-protection benefits.

• Selling strategically across financial years
Rather than selling multiple assets at once, investors may stagger disposals to reduce taxable income spikes.

• Increasing deductible expenses and depreciation
Maximising legitimate deductions, building depreciation schedules, renovations, and interest deductibility may become even more important.

• Focusing on development or value-add opportunities
Some investors may shift from passive “buy and hold” investing toward:

• duplex developments,
• granny flats,
• renovations,
• subdivision,
• or new builds,
  because active value creation can offset weaker after-tax capital gains outcomes.

• Purchasing new housing supply
Because governments are encouraging new housing construction, there may eventually be future tax incentives favouring:

• new builds,
• build-to-rent,
• or developments that increase supply.

• Moving toward intergenerational wealth strategies
Rather than selling assets during their lifetime, some investors may look at:

• estate planning,
• family trusts,
• holding assets for children,
• or long-term passive income strategies.

Importantly, these CGT changes are still proposals and could change significantly before 2027 — or may never fully proceed in their current form. Historically, major tax reforms often undergo amendments, exemptions, or grandfathering arrangements after industry consultation.

For property investors specifically, many accountants are currently advising clients not to make rushed decisions based on headlines alone. The combination of:

• stamp duty,
• selling costs,
• agent fees,
• legal fees,
• lost rental income,
• and possible future market growth

can sometimes outweigh the benefit of exiting early.

A more balanced question for investors may be:
“Does this property still suit my long-term financial goals under the new tax environment?”

Before making decisions, investors should speak with:

• their accountant,
• financial planner,
• mortgage broker,
• and property adviser

to model different scenarios based on their personal income, debt levels, and retirement plans.

Tax laws may change, but smart investors adapt. The key isn’t reacting emotionally to headlines — it’s understanding how to structure wealth strategically in changing markets.”

 If you have any questions, call us for a confidential discussion, with no strings attached.