Almost everything written about the 1 July 2027 capital gains tax reform says the same thing: investors will pay more. We ran the numbers through our own capital gains tax calculator and that is not what comes out.
For a property bought after the change, growing at the long-run national average, the new rules land within a few hundred dollars of the old ones. Grow slower than that and you pay less than you would today. Grow faster and you pay a great deal more.
The reform does not raise the tax on property. It changes what the tax is charged on, and that quietly reshuffles who wins and who loses.
What actually changes on 1 July 2027
The 50% CGT discount goes. In its place, two things:
- Cost base indexation. Your purchase price and buying costs are lifted by CPI over the years you hold. You are taxed on the gain above inflation, not the whole gain.
- A 30% minimum tax rate on that indexed real gain.
Both apply only if you have held for more than 12 months, and both apply to individuals, trusts and partnerships. Companies and super funds keep their existing settings.
The old system gave you half your gain tax free no matter how fast prices moved. The new one gives you inflation tax free, and nothing else. That single swap is the whole story.
Growth against inflation decides it
We modelled a $1 million purchase made in 2028, held ten years, sold by an investor on $120,000 of other income. Every figure is what our calculator produces under each set of rules, so it is arithmetic rather than opinion.
The change in CGT payable, new rules against the old 50% discount:
| Annual growth | CPI 2.0% | CPI 2.5% | CPI 3.5% |
|---|---|---|---|
| 3.0% | -$45,652 | -$52,645 | -$52,645 |
| 5.4% | +$30,158 | -$220 | -$65,119 |
| 8.0% | +$137,136 | +$106,759 | +$41,859 |
| 10.0% | +$236,764 | +$206,386 | +$141,487 |
A minus sign means you pay less than you would have under today’s rules.
At 5.4% growth and 2.5% inflation the reform is a rounding error. That 5.4% is not a number we picked to flatter the result: it is roughly what Australian dwelling values have averaged over the past 30 years on Cotality’s figures.
Slow growth is now worth more, for tax
Look at the top row. A property growing at 3% a year costs you around $50,000 less in CGT under the new rules than the old ones.
That is not a mistake. If prices barely outrun inflation, indexation shelters nearly the whole gain, and half of almost nothing was never worth much. The 50% discount only ever paid you in proportion to how fast the asset ran.
Now look at the bottom row. At 10% growth the same property costs you over $200,000 more.
The reform is, in effect, a tax on outperformance. The better your selection, the more of the upside the change takes.
The longer you hold, the worse it gets
This is the part almost nobody has said out loud. Same $1 million purchase, 5.4% growth, 2.5% inflation, varying only how long it is held:
| Held for | Change in CGT |
|---|---|
| 3 years | -$14,528 |
| 5 years | -$15,933 |
| 10 years | -$220 |
| 15 years | +$32,741 |
| 20 years | +$89,783 |
| 25 years | +$180,010 |
Short holds come out ahead. Somewhere around ten years it flips, and from there it gets steadily worse.
The reason is compounding. Growth compounds on the whole value, indexation only compounds on the cost base, and the gap between them widens every year. Under the old rules a longer hold was rewarded with a bigger discount in dollar terms. Under the new ones a longer hold means a bigger share of your gain sits above inflation and gets taxed.
Buy and hold forever has been the default play in Australian property for forty years. On tax alone, the reform argues against it.
Higher inflation now helps you
Read across the 5.4% growth row. At 2% inflation you pay $30,158 more. At 3.5% inflation you pay $65,119 less.
Higher inflation means more indexation, which means less of your gain is taxable. For the first time, an investor with a long hold has a tax reason to want inflation running warm.
That is the opposite of how property investors have been trained to think, and it is worth sitting with before anyone tells you the reform is simply bad for investors.
What this does not tell you
Three limits.
These figures are for a property bought after 1 July 2027. If you already own, or you buy before the change, your gain has to be split across the transition date. How that split works is not settled. Some readings have it apportioned by how long you held either side of the date; others have you establishing a market value at 1 July 2027 that becomes your new cost base. The ATO is expected to publish a formula alongside the valuation option. Which one you use materially changes the answer, so we have not put numbers on that case here.
Growth and inflation are assumptions, not forecasts. Nobody knows what either does over ten years. The point of the table is the shape, not any single cell. If you take one thing from it, take the direction: the faster your property runs, the more the change costs you.
This is general information only and not financial, tax, or credit advice. Your marginal rate, your ownership structure, your other income and any carried-forward losses all move the answer. Run your own numbers in the calculator, then take them to your accountant.
What we are telling clients
Nothing about this changes what makes a good investment property. It changes the arithmetic on two decisions.
If you are weighing whether to sell an existing property before the deadline, that is a separate question with its own maths, and we have covered it in should you sell before July 2027.
If you are buying after the change, the reform quietly rewards getting out earlier than the old rule of thumb suggested, and it takes a bigger cut of your best-performing assets. Neither is a reason not to buy. Both are reasons to be deliberate about the hold period rather than defaulting to forever.
Which market you buy in matters more than the tax treatment. A buyers agent in Melbourne is looking at a very different growth profile to one in Perth, and the table above shows how much that changes the bill.
Sources
- Cotality Home Value Index, released 3 August 2026 for long-run growth context
- Baker McKenzie on the CGT discount and negative gearing changes
- Pitcher Partners: CGT reform is law, what to do before 1 July 2027
- ATO: reforming negative gearing and capital gains tax
Modelling produced with our own capital gains tax calculator. The working is in scripts/model-cgt-reform.mjs and can be rerun with different assumptions.
If you want the hold-versus-sell numbers run on your actual property and structure, book a free discovery call.
