When you eventually sell an investment property you've owned since before 12 May 2026, your tax bill will be worked out one of two ways:
- Option A: using a certified valuation, or
- Option B: using the tax office's own default method.
Getting the valuation done is what lets you actually compare the two and use whichever one works out to lower tax. In the example below, that gap is worth over $20,000.
The numbers we're using in this example
| Purchase price | $500,000 |
|---|---|
| Purchase date | 1 July 2018 |
| Certified valuation | $1,100,000 |
| Valuation date | 1 July 2027 |
| Sale price | $1,400,000 |
| Sale date | 1 July 2033 |
| Tax rate used | 45% (top marginal rate) |
| CPI assumption | 4% per year |
Same numbers, used consistently through every table and calculation below and verified against our internal CGT calculator.
How the tax office's "Default Estimate Method" actually works
It's simpler than it sounds, and that's the problem. The tax office doesn't ask what your property was actually worth on 1 July 2027. It just looks at your total ownership period and does the maths on time alone.
Here's where those numbers actually come from:
| Period | Dates | Length |
|---|---|---|
| Total ownership | 1 July 2018 – 1 July 2033 | 15 years |
| Before 1 July 2027 | 1 July 2018 – 1 July 2027 | 9 years |
| After 1 July 2027 | 1 July 2027 – 1 July 2033 | 6 years |
So the tax office assumes 9 of the 15 years (60%) of the total profit happened in the "old rules" era, and taxes the rest under the new rules regardless of whether the property actually boomed early and flatlined for the last decade, or the other way around. The formula can't see that. It just divides by time.
The two options, side by side
| With a certified valuation | Without one (ATO's default method) |
|---|---|
| Uses the real value: $1,100,000 as at 1 July 2027 | Uses time only: 9 of the 15 years counted as "old rules" |
| Splits the $900,000 gain based on what actually happened | Splits the $900,000 gain based on a straight-line time split |
| In this example: $138,633 tax | In this example: $159,322 tax |
The full calculation, step by step
Here's every step that leads to those two numbers, using the inputs above. The green column is the certified valuation; the pink column is the tax office's own default guess.
| Step | With the certified valuation | Without it (ATO default) |
|---|---|---|
| Gain before 1 July 2027 | $1,100,000 - $500,000 = $600,000 | ≈ $540,000 (a rough 9/15 time split) |
| Taxable amount (50% discount applies) | $300,000 | $269,967 |
| Cost base adjusted for inflation over the last 6 years | $1,100,000 → $1,391,926 | $1,039,934* → $1,315,919 |
| Taxable amount left over after that adjustment | $8,074 | $84,081 |
| Total taxable gain | $308,074 | $354,048 |
| Tax owed at 45% | $138,633 | $159,322 |
In plain terms: both methods get an inflation top-up on the second half of the gain. But the certified valuation starts from the real number, so that top-up wipes out almost all of the remaining tax. The tax office's guess starts from a lower number, so a lot more stays taxable even after the same inflation adjustment.
The valuation didn't create this saving out of nowhere. It just gave the tax office the true number to work with, instead of a guess that happened to land in the wrong spot.
Why this matters
A certified valuation costs a few hundred dollars and takes a couple of weeks to arrange. In the example above, it was worth $20,688 at tax time, over a hundred times what it cost to get. For most owners, that's not a close call. It's cheap insurance on one of the biggest tax decisions you'll make on this property.
Example figures are illustrative only and will vary based on your own purchase price, growth pattern, and holding period. This article is general information, not tax advice. Speak with a registered tax agent or accountant about your own circumstances.
