The 2027 CGT reset is coming: will your property portfolio be prepared?

For high-value property owners, 1 July 2027 is more than another date in the tax calendar. It may become a critical reference point for the future tax treatment of assets you have spent years building, improving and protecting.

The Australian Government's proposed Capital Gains Tax reforms are set to change how gains accruing from 1 July 2027 are treated for eligible CGT assets, including commercial property.

For assets owned before that date and sold afterwards, the value at 1 July 2027 will separate gains made under the current arrangements from gains made under the new arrangements. That means the evidence supporting your property's value at the reset date could influence the calculation when you eventually sell.

For owners of substantial or complex property portfolios, leaving that evidence to chance could create unnecessary risk.

What is changing from 1 July 2027?

Under the Government's announced reforms, the existing 50 per cent CGT discount for eligible individuals, trusts and partnerships will be replaced by cost base indexation and a minimum 30 per cent tax rate on real capital gains.

The new arrangements will apply prospectively to gains accruing from 1 July 2027. They will not trigger a tax liability on that date. CGT will continue to arise when a relevant gain is realised, such as when an asset is sold.

For an eligible asset held before 1 July 2027 and sold later:

• the current CGT rules will apply to the gain between the asset's existing cost base and its value at 1 July 2027; and
• the new indexation and minimum-tax arrangements will apply to gains accruing after 1 July 2027.

This makes the property's value at the reset date an important dividing line.

The consequence of being unprepared

The reset date may feel distant from the eventual sale of an asset. That is precisely the risk.

If the property is sold, transferred or restructured years later, owners may need to establish what it was worth on 1 July 2027. By then, the evidence that shaped value at the time may be incomplete, difficult to retrieve or open to challenge.

That could include:

• leases, incentives and tenancy schedules that have since changed;
• records of vacancies, arrears or upcoming reviews;
• details of the property's condition and capital expenditure requirements;
• planning controls, development potential and market conditions at the time;
• comparable transactions that were relevant in 2027 but less accessible later; and
• the assumptions and methodology needed to explain the adopted value.

For a high-value asset, even a relatively small difference in the reset value may have a meaningful impact on the allocation of the gain between the old and new CGT regimes.

Being unprepared could also result in delays, additional professional costs and greater uncertainty when you want to move quickly on a sale, succession plan, restructure or portfolio reallocation.

The portfolio may be valuable. The evidence behind its value must be equally robust.

Can the value be determined later?

The Government's current transitional framework indicates that taxpayers will be able to determine an asset's value when it is eventually realised by either:

• obtaining a valuation of the asset as at 1 July 2027; or
• using a specified apportionment formula based on the asset's growth over the holding period, supported by future ATO tools.

For straightforward, readily priced assets, an apportionment approach may be suitable. Commercial property is often different.

Its value can be shaped by lease covenants, passing income, incentives, vacancy, location, building condition, zoning, development potential and investment-market sentiment. These factors do not always move evenly over time, and they may not be captured fully by a formula.

A contemporaneous or well-supported market valuation can provide a clearer, property-specific record for owners who want greater certainty around a significant asset.

What should a defensible commercial property valuation include?

A credible valuation should go beyond a desktop estimate or sales appraisal. Depending on the asset and the requirements of your tax adviser, it should clearly document:

• the valuation date and purpose;
• the legal or beneficial interest being valued;
• the property's physical condition and relevant attributes;
• current leases, income, outgoings, incentives and vacancies;
• the valuation methodology adopted;
• market evidence and comparable transactions;
• key assumptions, risks and limitations; and
• the valuer's qualifications and independence.

For commercial property, a site inspection and full market analysis can provide critical context that may be difficult to recreate later.

Do not let your tax strategy fall behind your property strategy

High-net-worth property owners tend to plan ahead. Acquisition structures, finance, asset management, succession and exit timing are rarely left until the final moment. The 1 July 2027 CGT reset deserves the same discipline.

Preparing early can help you:

preserve evidence while it is current and accessible;

understand which assets may warrant a formal valuation;

coordinate valuation advice with your accountant and tax adviser;

reduce the risk of a rushed retrospective exercise;

support future sale, restructure and succession decisions; and

move with greater confidence when an opportunity arises.

The aim is not to predict your future tax outcome. It is to make sure the information needed to support that outcome is not missing when it matters most.

Is your commercial property ready?

X Commercial's Valuation & Advisory team can prepare independent, evidence-based commercial property valuations, with fixed fees, high-quality reporting and prompt turnaround times.

Do not wait until the asset is on the market to discover what evidence you no longer have. Prepare for the changes now.