If you own an investment property, the way capital gains tax (CGT) is worked out is changing from 1 July 2027. Whether you personally need a valuation comes down to one simple question: when did you buy the property?
The short version of what's changing
Right now, if you sell an investment property, you get a flat 50% discount on the gain. From 1 July 2027, that changes for most properties. Instead of one flat discount for the whole time, you owned it, your gain gets split into two eras:
- Before 1 July 2027: the old rules still apply (the 50% discount).
- After 1 July 2027: a new rule applies instead, where your original cost is adjusted upward for inflation (called "indexation") before working out the taxable gain.
So, the tax office needs to know: how much of your gain happened before 1 July 2027, and how much happened after.
Why a valuation is the thing that decides this
Think of a valuation as a professional stamp on the calendar. It tells the tax office, in writing, "this property was worth this much on 1 July 2027." That one number is what splits your total gain into the pre-2027 portion (old rules) and the post-2027 portion (new rules).
Without a valuation, the tax office doesn't have that number, so it doesn't try to work out what happened. It just estimates, based on how many years you owned the property before vs. after the cut-off date. It assumes your property grew in value at a steady, even pace the whole time, which is rarely how property works.
A simple example
Say you bought an investment property for $500,000 in January 2018.
- Certified valuation on 1 July 2027: $1,050,000
- Sold in January 2033 for: $1,200,000
With the valuation, the tax office can see exactly how the $700,000 total gain breaks down:
- $550,000 gained before 1 July 2027 ($1,050,000 − $500,000): taxed under the old 50% discount rule.
- $150,000 gained after 1 July 2027 ($1,200,000 − $1,050,000): taxed under the new indexation rule.
Without the valuation, the tax office would instead just look at how many years you owned the property before vs. after 1 July 2027, and split the $700,000 by that ratio regardless of when the property actually gained most of its value.
| With the certified valuation | Without one (ATO's default estimate) |
|---|---|
| Uses the real value: $1,050,000 as at 1 July 2027 | Uses time only: about 9.5 of the 15 years counted as "before" |
| Gain before 1 July 2027: $550,000 | Gain before 1 July 2027: about $443,300 |
| Gain after 1 July 2027: $150,000 | Gain after 1 July 2027: about $256,700 |
Which method costs less tax depends entirely on your own numbers; there's no rule that says one always beats the other. We break this down properly, using this same example, in our next two guides:
- You Could Lose Tens of Thousands in Tax If You Skip the Valuation
- Certified Valuation vs ATO's Default Formula: Which One Actually Wins?
The one thing that's true either way: you can only make that comparison if you actually have a certified valuation in hand. Skip it, and the tax office's default formula becomes your only option, whether it happens to help you or cost you.
What if I bought after the Budget (12 May 2026)?
Different rules apply, and a valuation generally isn't part of it:
- Brand-new property, never lived in before: the full 50% discount still applies to your whole gain; no valuation needed. Read more about new-build properties
- Existing (second-hand) property: only the inflation-adjustment method applies to your whole gain; no valuation needed, and no choice to make either. Read more about existing homes
This guide is written for properties bought before 12 May 2026, most property investors in Australia today, who bought before the Budget and have a genuine decision to make.
Why this matters
A certified valuation isn't just paperwork. It's the number that decides how your tax bill is calculated for a change that's now locked into law. Get it done, keep it filed away with your original purchase contract, and you've protected yourself either way the numbers fall.
Here's the simple logic behind why the number itself matters:
- Everything your property gained before 1 July 2027 gets the flat 50% discount.
- Everything it gains after that date only gets the smaller inflation adjustment instead.
- So generally speaking, the higher your certified valuation as at 1 July 2027, the more of your total gain sits in that discounted "before" bucket.
- Which usually means a lower overall tax bill when you eventually sell.
That's not something you can influence, and it shouldn't be. A valuer certifies what the market genuinely says your property was worth, not a number to suit your tax outcome. But it does explain why getting the valuation right, from a properly registered valuer, is worth taking seriously, not just getting one done for the sake of it.
This article is general information only and doesn't consider your personal circumstances. Speak with a registered tax agent or accountant about your own situation.
