Capital gains tax on property: Is it really time to sell?
Unless you’ve been living off-grid, you’d know by now that capital gains tax on property is changing. From 1 July 2027, the current 50% CGT discount will be largely replaced by a system pegged to inflation, with a minimum tax rate of 30% applying to eligible capital gains.
The date’s on the calendar, but the action to take isn’t necessarily clear.
For some investors, selling before the new rules begin could make financial sense. Others may be better off holding an asset that continues to deliver strong rent and capital growth. The question to ask yourself is whether your property still deserves its place in your investment strategy.
Before making that call, you need to understand the tax position, the performance of the property and what it could achieve if you sell in the current Perth market.
What’s changing with capital gains tax on investment property?
Under the current rules, eligible individuals who sell an investment property after holding it for at least 12 months can generally reduce their capital gain by 50% before it is included in their taxable income. The CGT discount.
From 1 July 2027, that discount will be replaced by cost-base indexation. Basically, the cost base of the asset will be adjusted for inflation, with tax applying to the real gain above inflation. You’ll also pay a minimum tax rate of 30% on eligible capital gains.
The new arrangements will only apply to gains accruing from 1 July 2027. So, the changes alone are no reason to rush a sale: gains accrued before that date will remain subject to the existing rules.
Of course, other factors will affect the outcome, including inflation, the property’s growth, how long it’s held and your individual tax position. General information is exactly that, and only an accountant can model how the changes would impact your specific property.
Review before reacting
It is easy to let a looming deadline force a decision. However, rushed calls are rarely rewarded in property.
Paying capital gains tax usually means an investment has made money. Nobody’s excited by a tax bill, but it’s a sign that your asset is building wealth – which is exactly what it’s meant to be doing.
The better question: Is this property still helping you achieve your financial goals?
A strong property in a well-performing location does not become a poor investment because the tax system changes. Fundamentals remain king. Rental income, ongoing costs, local demand and the asset’s potential for further growth all carry weight.
Yes, the reforms are still a good reason to take a closer look. A review may reveal your property is still doing exactly what you need it to do. It may also reveal that you’ve been holding on out of habit.
When selling may be the move
To many investors’ disappointment, there is no universal signal that indicates the best time to sell. That said, a few common situations can make the conversation more timely.
Your property has delivered substantial growth
Perth’s recent growth has created significant equity for many investors. Realising that gain could mean paying down debt or freeing up capital for the next move.
It all depends on whether your equity could be working harder somewhere else.
The return no longer justifies the expense
Strong headline growth can hide weak asset performance. Broader market movements are no guarantee of individual asset performance, and factors such as rising maintenance costs, a low rental yield, strata expenses or recurring vacancies can steadily reduce the return you actually receive.
A current appraisal can help you compare the property’s likely sale price with the income and costs involved in continuing to hold it.
Your investment strategy has changed
The right property five or ten years ago may not be the right one today. A change in situation or risk appetite, such as retirement, can shift the role an investment property plays in your plans.
Tax should form part of that assessment, but it should not make the decision on its own.
The market presents a strong selling opportunity
Perth is not one property market. Buyer demand can differ widely between suburbs, dwelling types and price brackets.
A city-wide median will not tell you what buyers are prepared to pay for your property right now. Recent comparable sales, competing listings and current buyer activity provide a far more useful picture.
What about capital gains tax on inherited property?
Inherited property has its own CGT rules. Inheriting a property does not usually trigger CGT, but selling it can. Whether tax applies depends on when the property was purchased, how it was used and when you sell.
Some inherited homes may receive a full or partial exemption, including eligible properties sold within two years of the owner’s death. These exemptions will remain, but taxable gains from 1 July 2027 may fall under the new system.
Estates can become complicated quickly, particularly when a property has been rented, held for a long period or shared between beneficiaries. Your accountant will guide you here.
Start with two numbers
Before deciding whether to hold or sell, you need two reliable figures.
The first is your likely tax position. An accountant can estimate the capital gains tax consequences of selling your property at different times and explain how the new rules apply to your circumstances.
The second is the property’s current market value. That’s where Xceed can help.
An appraisal grounded in recent comparable sales and current buyer activity gives you a realistic view of what the property could achieve. It can also reveal whether there’s a genuine market opportunity or whether holding remains the stronger option.
Sell or stay the course?
The capital gains tax changes create a reason to review your investment property. They do not create a reason to panic.
The most useful decision will come from looking at the whole investment: its current value, performance, future potential and place in your plans.
If you are considering cashing out, start by finding out what your property is worth in today’s market. Get in touch with the team for a current property appraisal.