The 2027 Property Tax Reform: What Actually Changes, and When
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026 and takes effect 1 July 2027. Here's exactly what changes for property investors, what's grandfathered, and what to do before then.
Two Acts, the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026, received Royal Assent on 26 June 2026. This is not a proposal, and it isn't sitting in a discussion paper waiting on an election. It's law, and from 1 July 2027 it changes how capital gains tax and negative gearing work for individuals and trusts.
One thing worth getting right before anything else: this isn't a property measure. It changes CGT for every asset an individual or trust holds — shares, collectables, business assets, all of it. CPA Australia has already put out guidance on valuing everyday collectables because of it. We're a property tracker, so this article and the rest of our content cover what it means for your property. But if you find yourself telling an accountant "the new property CGT rules," expect to be corrected.
The three changes, in plain terms
| Change | Applies from | Who it affects |
|---|---|---|
| 50% CGT discount replaced by cost base indexation | 1 July 2027 | Individuals and trusts, most existing residential property (new dwellings keep the discount by default) |
| 30% minimum tax on capital gains | 1 July 2027 | Australian resident individuals only |
| Negative gearing losses quarantined | 2027-28 income year | Residential dwellings acquired on or after 7:30pm, ACT legal time, 12 May 2026 |
Three separate mechanisms, and they interact: the minimum tax is calculated off what's left after the discount/indexation step, and quarantined losses get applied against capital gains before the discount step runs. None of them can really be understood in isolation, which is a lot of why the commentary on this reform is so inconsistent.
Am I grandfathered?
For negative gearing, this comes down to one date: when you signed the contract to buy, not when you settled. Exchange before 7:30pm, Australian Capital Territory legal time, on 12 May 2026, and negative gearing keeps working exactly as it does today — a rental loss still offsets your salary and other income. Exchange on or after that moment and, from the 2027-28 income year, a loss on that property no longer offsets your salary; it carries forward and reduces future rental income or capital gains from residential property instead.
New residential dwellings are carved out of this regardless of when you bought them. Our negative gearing grandfathering calculator works out which side of the line a specific property sits on, citing the section of the Act behind the answer.
The 30 June 2027 deemed disposal, and why the valuation matters
Every asset an individual holds on 30 June 2027 is treated as sold just before that date and bought back on 1 July 2027. Nothing is actually taxed at that point — the notional gain is disregarded and deferred until you actually sell — but the value used for that deemed sale matters, because it's what splits your eventual gain into a pre-2027 portion (taxed under today's rules, discount included) and a post-2027 portion (taxed under the new indexed system).
The default value is a market valuation as at just before 1 July 2027. The Act allows for an alternative apportioning method instead, but that method has to be set by the Minister in a legislative instrument, and as of this writing no such instrument exists — it's a discretion, not a guarantee it will ever be made. If it never arrives, market value is the only route to the deemed proceeds, and a valuation is a snapshot you can only take once, on that date. Getting one done, even before you need to lodge anything, is the kind of thing worth raising with your accountant now rather than in 2040 when you eventually sell.
You don't have to decide anything today. The choice about how the value is worked out isn't legally due until the tax return for the year you actually sell. See our deep dive on why the 30 June 2027 valuation matters for what to do about it now.
Cost base indexation: nothing to do differently, but the stakes are higher
From 1 July 2027, the part of your cost base you spend from that date onward gets adjusted for inflation using ATO quarterly index numbers before it's subtracted from your sale proceeds. Money you already spent before 1 July 2027 doesn't get indexed; it carries through into the pre-2027 portion of the calculation instead, which is why the deemed 30 June 2027 valuation matters so much.
Practically, this doesn't change what you should be tracking. Purchase price, stamp duty, conveyancing, and every capital improvement have always mattered for your cost base, and they still do. It just means a gap in your records now costs more in 2030 than it would have under the old flat-discount system, because indexation only has something to adjust if the expense is actually recorded against a date. Our deep dive on indexation and record-keeping covers what isn't indexed, why the twelve-month rule doesn't restart in 2027, and the residency test that most published commentary has backwards.
Loss quarantining, if your portfolio is negatively geared
If a property falls under the new rules (see grandfathering above), a net rental loss from 2027-28 onward doesn't reduce your salary anymore. It's pooled across all your quarantined residential properties, compared against your rental income from the same pool, and only the excess is quarantined — it isn't lost, it carries forward against next year's rental income, and eventually against capital gains from residential property if it's still sitting there when you sell.
This is a genuine change to how negative gearing works for anyone buying from 12 May 2026 onward, and it's worth modelling before you commit to a purchase, not after. See our deep dive on how the quarantine pool works, including the worked example straight from the Act. Our cash flow projection calculator shows the pre-tax picture; talk to your accountant about what quarantining does to the after-tax number for a specific property.
Pre-1985 property: the exemption has a use-by date
If you've held a property since before 20 September 1985, it currently sits outside CGT altogether. That doesn't get grandfathered indefinitely. The asset is deemed sold at its 30 June 2027 market value and reacquired the next day; the pre-2027 growth stays exempt permanently, since there's no deferred component the way there is for later acquisitions, but from 1 July 2027 the property re-enters the CGT system with a fresh cost base. Growth from that point on is taxable when you eventually sell.
If this applies to you, the 30 June 2027 valuation matters even more than usual, because it's the number that separates decades of exempt growth from what's about to become a taxable asset.
What to raise with your accountant now
- A market valuation of any long-held property, timed as close to 30 June 2027 as practical, particularly if it's pre-1985 or you're unsure whether the apportioning instrument will ever be made.
- Whether a purchase you're weighing up now would exchange before or after 12 May 2026's cutoff, and what that does to the after-tax cash flow.
- Whether your existing record-keeping actually captures acquisition and improvement costs with the dates that indexation is going to need.
None of this needs deciding today. It needs a conversation before 2027, not a scramble in the return for whichever year you eventually sell.
What this doesn't touch
Two misconceptions worth killing early. There's no unrealised capital gains tax on property under this reform, and none has been proposed — that rumour is a mix-up with Division 296, a separate measure that taxes earnings attributable to superannuation balances above $3 million, at a higher rate again above $10 million, and reaches nothing held outside super. And the 30% minimum tax isn't a flat rate charged on the full gain; it only tops up your bill if what you'd otherwise pay falls short of 30%, and because the cost base is indexed first, the gain it's calculated against is already smaller than the raw sale-price difference. Both are covered in more detail in our CGT discount help article and FAQ.
Common questions
Is the 2027 reform actually law, or still a proposal?
It's law. Both Acts received Royal Assent on 26 June 2026 and take effect from 1 July 2027. A lot of published commentary still describes it as a proposal.
Does the reform only apply to property?
No, and this is the mistake most likely to cost you credibility with an accountant. It changes CGT for every asset an individual or trust holds, including shares, collectables and business assets. Our content covers the property side because that's what we build for, but the law itself isn't property-specific.
Am I grandfathered for negative gearing?
It depends on your contract date, not your settlement date. Exchange before 7:30pm Australian Capital Territory legal time on 12 May 2026 and negative gearing keeps working as it does today. New residential dwellings are carved out regardless of when you bought. Our grandfathering calculator works out which side of the line a specific property sits on.
Will I be taxed on 30 June 2027?
No. Every asset is treated as sold just before that date and bought back the next day, but the notional gain is disregarded and deferred until you actually sell. What the deemed sale does is split your eventual gain into a pre-2027 portion and a post-2027 portion.
Is there an unrealised capital gains tax on property?
No, and none has been proposed. That rumour is a mix-up with Division 296, which taxes earnings attributable to superannuation balances above $3 million at an extra 15%, and at 25% on the part attributable to a balance above $10 million. Both thresholds index annually from the 2027-28 income year, and none of it touches property held outside super.
This article is general information about legislation, not tax advice. Confirm how the reform applies to your specific circumstances with a registered tax agent — particularly for anything you plan to sell, buy, or value near either the 12 May 2026 or 1 July 2027 dates.