Should You Sell Your Investment Property Before or After 1 July 2027?

The most consequential CGT timing decision in twenty-six years lands on 1 July 2027. From that date, the 50% CGT discount stops accruing on residential investment property; gains accruing after the date are taxed under the new CPI indexation regime with a 30% minimum effective rate. Gains accruing before the date keep the 50% discount, apportioned by time. This article walks through whether selling before commencement, exactly on commencement, or after commencement produces the best outcome and the answer depends on growth, holding period and the inflation outlook.

How the transition apportionment works

Treasury's design avoids forcing every existing investor to obtain a 30 June 2027 valuation. Instead, the total gain is calculated normally (sale price minus cost base), then split by the proportion of the holding period that fell before and after commencement. The pre- portion is discounted by 50%; the post-portion is indexed by CPI from 1 July 2027 to disposal and subjected to the 30% minimum floor.

Michael's example small difference

Michael owns a grandfathered investment property acquired in 2020 for $400,000. He sells two years post-commencement (around mid-2029) for $560,000. Total nominal gain: $160,000. The property's value at 1 July 2027 was approximately $500,000. So:

• Pre-1 July 2027 component: ~$100,000 (acquisition to commencement)
• Post-1 July 2027 component: ~$60,000 nominal, less ~$25,313 CPI indexation = $34,688 real
• Old rules: 50% discount on $160,000 → $80,000 assessable → $28,200 tax at 37%
• New rules: $50,000 assessable from pre-component + $34,688 from post-component → ~$31,300 tax

Michael pays approximately $3,100 more tax than under the pure old rules a small premium for the modest amount of post-commencement growth. Selling earlier to capture the pure 50% discount would have left growth on the table.

Jane's example when post-2027 hurts

Jane bought a Sydney property in 2010 for $800,000 and sells in 2042 for $1.6 million. Total nominal gain: $800,000. The holding period straddles 17 years before commencement and 15 years after.

• Pre-component (17/32 of gain): $425,000, discounted by 50% → $212,500 assessable → $99,875 at 47%
• Post-component (15/32 of gain): $375,000 nominal. With 2.5% CPI compounding 15 years, indexation reduces this materially. Real gain ~ $228,000 → $107,160 at 47%
• New-rules total: ~$207,000
• Old-rules total: $400,000 assessable on entire $800k gain → $188,000 at 47%

Jane pays approximately $19,000 more under the transitional rules for this long-hold, high- growth Sydney scenario. The 50% discount on a doubled asset is genuinely powerful; CPI indexation only neutralises inflation, not real growth.

A decision framework

Ask three questions in order:

1. How much real growth is left in this asset? If you expect strong real growth (above 3-4% per annum above CPI) for the remaining hold period, the 50% discount beats CPI indexation. Selling before commencement may save tax.
2. What is the alternative use of the proceeds? Selling triggers transaction costs (5-7% of sale price) and CGT on the entire gain immediately. The replacement investment must outperform the after-tax compounding of the existing position.
3. What is your marginal rate trajectory? If you expect to be on a lower marginal rate in future (retirement, sabbatical), the deferral cost of post-commencement gains may be acceptable.

Don't forget transaction costs

Selling and rebuying is rarely tax-positive once you include agent commission (2-3%), marketing (~$5k), legal fees, capital gains tax due now (not deferred), and stamp duty on the replacement (4-5% in most states). For a $1.6m sale, total round-trip cost can exceed $150,000 once all of the hidden costs of buying back in are accounted for. The tax saving from "locking in" the 50% discount must exceed this round-trip cost to be net-positive.

When the answer is "don't sell at all"

For long-term holders with stable rental income, the dominant strategy remains holding. The transitional apportionment automatically captures the 50% discount on accrued pre-2027 gains. Sell only when the underlying investment thesis changes not because of tax timing.

For more analysis, see our companion piece on CPI indexation vs the 50% discount and our six CGT worked examples for property owners.