New complex (and costly) capital gains tax laws

5 August 2026

One of the misnomers of the new capital gains tax laws is that the 50% discount will be removed. In fact, the discount will continue to apply to capital gains on an asset up to 1 July 2027, even if that asset continues to be held and is sold after that date. That is, if investors or business owners already own an asset and sell it after 1 July 2027, some of the capital gains will be taxed under the old rules attracting the 50% discount and any gains made after 1 July 2027 will be taxed under the new inflation adjusted rules, and at a minimum tax rate of 32%. (including the Medicare Levy).

So how do you work the capital gains on an asset before and after 1 July 2027?

There will be two ways of determining the value of an asset (e.g a property asset) at 1 July 2027, either using a yet to be released formula or by obtaining an independent valuation. While the ATO method has not finalised formula, it has indicated that the capital gain will be apportioned over the period that the asset has been held.

As a simplistic example, if a farm property was acquired on 1 July 2013 for $5 million and is sold in 2041 (held for 28 years), then the capital gain (from 2013 to 2027, 14 years) will attract the 50% capital gains tax discount. The other half of the gain (from 2027 to 2041, also 14 years) will be taxed based on the new methodology, including inflation adjustments to the cost base at 1 July 2027. It is more complex isn’t it? And increased complexity increases accounting fees.

However, taxpayers may choose the alternate method of obtaining a valuation of their asset as at 1 July 2027. And we suggest owners of Sydney property and farmland will need to obtain a valuation, as those assets have had substantial increases in their values to 30 June 2027, and it will be in their interest to do so.

By way of example, let’s use the same farm property acquired for $5 million in 2013. Rural Bank tells us that average farmland values have tripled between 2013 and 2025, so let’s assume its worth $15 million at 30 June 2025 and increases by CPI to $16.1 million to 30 June 2027 (its market value as determined by a valuer). Using only a CPI increase from 2027 to 2041 we will the property is then sold for $26 million.

On a pro rata basis, the capital gain attracting the 50% discount is calculated as $10.1 million on an assumed property value of $15.1 million at 1 July 2027, as the gain is spread evenly over the period.

However using the market valuation method, the capital gain attracting the 50% discount is $11.1 million on an assumed property value of $16.1 million at 1 July 2027. That is, the valuation method will result in an additional $1 million gain subject to the 50% discount over the pro rata method.

This analysis assumes a modest CPI increase in the land post 2027 and does not consider the inflation impact on the cost base. Where those assumptions are changed, variances (both higher or lower) will occur in the above analysis.

When should I get the farm or Sydney property valued?

Many are aware of this circumstance above and there is commentary that valuers will be overwhelmed. They will be. There are simply not enough valuers to value all the property requiring valuation. There is no requirement to have a valuation at 1 July 2027 completed at that time. Many will delay the process or even leave the valuation to that time when the property is sold. However, valuers do charge a higher fee to prepare a historical valuation (e.g. 10 years after the valuation date).

And the ATO has not yet specified who should carry out all these valuations. But its existing guidelines on property valuations for tax purposes require they be undertaken by an independent registered valuer, supportable by evidence and capable of being defended if reviewed. And this is where the more cost comes in. Residential valuations up to a value of $2 million might cost $700 to $1,200. The higher the value of the property, the higher the fee. And higher value commercial property and specialised asset valuations (e.g. farm properties) may cost $10,000 to $15,0000.

In short, if your property or other asset has experienced significant historical increases in value, and it is likely that future increases will be more modest, it will be in your best interest to have the property valued. That will be difficult due to demand and come at a cost.

Peter Debus is a director of PrincipleFocus, a Chartered Accountant and Chartered Tax Adviser.