Let's Start With the Right Mindset

Imagine someone told you: "Don't accept that pay rise — you'll pay more income tax."

Or: "Close your business down — you're making too much profit and the tax bill is too high."

You'd think they'd completely lost the plot. And yet, every time Capital Gains Tax appears in the news, a surprising number of property investors start asking whether they should sell everything — or stop investing altogether.

Here is the simple truth, and it doesn't change regardless of what budget gets handed down:

The question we should always be asking is not "how do I avoid paying CGT?" It's "how do I build enough wealth that even after tax, I'm in a far better position than if I'd never invested at all?"

That's the lens through which we'll look at these changes.

What Was the Old CGT Rule?

Australia's previous system was genuinely generous to long-term property investors.

If you held an asset for more than 12 months and then sold it, you were entitled to a 50% discount on your capital gain. This meant only half of your profit was counted as taxable income.

On top of that, if you owned the property jointly with a partner, each person only declared their share of that already-discounted gain against their own income. This spread the tax burden across two people and two tax brackets.

Let's see what that looked like with a $500,000 capital gain:

That's the system that served long-term investors well since 1999. You made a profit. You paid tax. You kept 81 cents of every dollar of gain. By most measures, that was fair.

What Is Changing From 1 July 2027?

The 50% discount is being replaced by something called cost base indexation.



Here is what that means in plain language.

When you sell a property under the new system, the government adjusts your original purchase price upward — to account for inflation over the years you owned it. You then pay tax only on the gain that is above and beyond what inflation would explain.

The idea behind it is actually reasonable: if inflation made everything more expensive, your "profit" should account for the fact that your money was worth more when you bought than when you sold.

There is also a new minimum tax rate of 30% on those adjusted gains. This means that even if your income in the year you sell happens to be low, you cannot pay less than 30% tax on your capital gain.

Two Scenarios, Side by Side

Let's use one property and look at two possible futures. We'll compare the old rule against the new rule so you can see exactly what changes — and what doesn't.

The Property

Scenario A — Normal Growth (8% per year, in line with long-term Australian property averages)

Sold for: ~$1,295,000     Capital gain: ~$695,000

The difference in this scenario is roughly $29,500 in extra tax. Yes, that's real money. But consider: you bought for $600,000 and sold for $1,295,000. After the new CGT rules, you still keep $537,000 of pure profit.

Scenario B — Strong Growth (12% per year — above average, premium location)

Sold for: ~$1,863,000     Capital gain: ~$1,263,000

Yes, the new rule costs roughly $95,000 more in tax in this scenario. That number is real and we won't minimise it.

But pause for a moment. You bought for $600,000. You sold for $1,863,000. Under the new rule, you paid $328,500 in tax and walked away with $934,500 in profit.

What Long-Term Investors Actually See

Australian residential property has averaged 8–10% compound annual growth over the past several decades. That's not a lucky run. It's what happens when you buy in the right areas and hold through the cycles.

Compounding is extraordinary. At 8% per year, money roughly doubles every nine years. At 10%, it doubles every 7.2 years. Let's see what that means for a $600,000 property held long term:

Over 27 years at 8%, your $600,000 becomes roughly $4.8 million. Even if the new CGT rules cost you an extra $150,000 to $200,000 when you sell — you are selling for nearly $5 million on a $600,000 purchase.

The tax difference between old and new rules is a rounding error against wealth of that scale.

There is also something important about how indexation works over long holding periods. The CPI adjustment to your cost base accumulates year after year. The longer you hold, the larger your indexed cost base grows — which actually reduces your taxable gain under the new system. Long-term investors aren't the losers here. The new system is broadly aligned with the buy-and-hold philosophy we have always advocated.

Can You Sell Before July 2027 to Lock In the Old Rules?

Technically, yes. Any capital gain realised before 1 July 2027 is still covered by the existing 50% discount.

But before you call your real estate agent, think carefully about the trade-off:

• The moment you sell, the property stops growing for you.
• You stop collecting rental income from that day.
• You pay real estate agent fees and other selling costs — typically 2–3% of the sale price.
• You still pay CGT, even at the old rate.
• You then have a pile of cash sitting in an account, growing much slower than your property would have.

The maths almost never favours selling a strong property just to access a slightly better tax rate.

The exception might be if you were already planning to sell for lifestyle or portfolio restructuring reasons. In that case, it makes sense to factor the timing in. But selling purely to beat the tax change date is rarely the right move for a property that is performing well.

What About Properties You Already Own?

There is good news here for existing investors.

The government has confirmed a split arrangement for properties you already hold when the new rules come in.

When you eventually sell, the gain is split across those two periods and each is treated under the rules that applied at the time. You get the benefit of both systems, proportionally. This is a reasonable transitional arrangement.

A Note on SMSF

As covered in Article 1, SMSF properties are not affected by the negative gearing changes. The same applies here — CGT treatment inside super is different and governed by its own rules.

During the accumulation phase, your SMSF pays 15% on investment income and capital gains — and only 10% on assets held longer than 12 months. During pension phase, CGT is zero.

These rates remain unchanged. The budget changes announced on 12 May 2026 do not alter how SMSF assets are taxed on sale. Our SMSF work with clients continues as normal.

Coming Up in Article 3 the full picture.

This is Article 2 of 3.

Article 3 will walk through the forward-looking strategies we are building for new purchases in this new environment. From higher-yield properties to co-living models, new builds, and SMSF structuring — there are smart ways to continue building wealth with property. We'll lay out the full picture.

Final Thought

Every rule change in tax law feels significant in the month it's announced. Most feel far less significant five years later, when the asset you almost sold has kept growing.

The investors who build real wealth are not the ones who have always had the best tax outcome in any given year. They are the ones who bought quality assets and refused to be scared out of them.

The CGT rules changed. The fundamentals of good property investing didn't.



If you'd like to talk through what this means specifically for your properties, your income situation, or your plans for the future — please reach out. That's exactly the kind of conversation we are here for.