The capital gains tax changes discussed in our earlier article have now become law. For many small business owners and property investors, that makes 1 July 2027 an important date for planning and record keeping.
If you own a rental property, commercial premises or certain business assets, it may be sensible to obtain a professional valuation as at 1 July 2027. You may be able to arrange a retrospective valuation later, but establishing an accurate value can become more difficult as time passes and evidence of market conditions becomes harder to find.
What is changing from 1 July 2027?
Under the new rules, the existing 50 per cent CGT discount will generally be replaced by cost-base indexation for affected assets held by Australian resident individuals and trusts. Pre-20 September 1985 property will also be caught by the new legislation. A minimum tax rate of 30 per cent will also apply to certain real capital gains.
The rules are intended to separate gains accrued before 1 July 2027 from gains accruing after that date. Broadly, an affected asset held across the transition may be treated as if it were sold immediately before 1 July 2027 and reacquired at that time.
Nothing is actually sold on the transition date, and the deemed transaction does not itself create an immediate tax bill. The pre-transition gain or loss is generally deferred until a later CGT event, such as the eventual sale of the asset.
Why might a valuation be important?
The asset’s market value immediately before 1 July 2027 may be used to divide the gain between the old and new CGT arrangements.
This could be relevant to assets such as:
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- residential investment properties
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- commercial or business premises
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- farms and other income-producing land
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- privately held shares or units
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- goodwill and certain other business interests.
Not every asset owner will require a formal valuation. The treatment depends on the type of asset, how it is used and the entity that owns it. Companies, partnerships, trusts and superannuation funds can have different tax outcomes. The main residence exemption, small business CGT concessions and special rules for certain housing investments may also affect the position.
For these reasons, the first step is to identify which assets may be affected before commissioning valuations.
Can the valuation be completed later?
The legislation allows the CGT calculation to be completed when the asset is eventually sold. It also allows for an alternative apportionment method to be set by legislative instrument.
At the time of writing, some supporting detail for that alternative method remains to be finalised. This is an area that should be checked again before relying on a particular calculation.
A retrospective valuation may also be prepared after 1 July 2027. However, a valuation obtained reasonably close to the relevant date may be easier to support. The valuer can work with more accessible information about comparable sales, the condition of the property, tenancy arrangements and market conditions at the time.
Years later, records may have been lost, the property may have been renovated and reliable comparable evidence may be harder to obtain.
What can owners do now?
There is no need to rush into selling an asset simply because the rules are changing. A more useful approach is to prepare.
Consider taking the following steps:
- Make a list of rental, commercial and business assets that you expect to hold on 1 July 2027.
- Confirm which individual or entity legally owns each asset.
- Gather purchase documents, improvement costs, legal fees, earlier valuations and ownership records.
- Keep evidence of the asset’s condition around the transition date, including photographs, leases and details of renovations.
- Ask your adviser which assets are likely to need a professional valuation.
- Where appropriate, engage a suitably qualified and independent valuer to assess market value as at 1 July 2027.
A real estate agent’s appraisal or online estimate may not provide the same level of independent, documented evidence as a formal valuation prepared for tax purposes.
Start the conversation before the valuation date
The right approach will depend on the asset, its ownership structure and your longer-term plans. A valuation is not automatically required in every case, but leaving the question until the asset is sold could make the process more difficult and expensive.
If you own rental or business property, speak with our CGT specialist before 1 July 2027. We can help identify which assets may be affected, review the available options and advise whether a formal valuation should form part of your preparation.
This article provides general information only and does not constitute personalised tax, financial or legal advice.