Do You Need a Property Valuation on 30 June 2027?
Significant changes to the capital gains tax (CGT) rules apply from 1 July 2027. For affected Australian-resident individuals and trusts, the current 50% CGT discount will be replaced by a new system based on cost-base indexation, with additional rules applying to real capital gains.
Importantly, the new rules preserve the existing CGT treatment for the portion of a gain that accrued before 1 July 2027.
Why is 30 June 2027 important?
For certain CGT assets held by individuals and trusts at 30 June 2027, the new legislation generally treats the asset as having been sold immediately before 1 July 2027 and reacqui
red immediately after that date.
The default value used for this deemed transaction is the asset's market value immediately before 1 July 2027.
This means that, for affected assets, establishing the market value at 30 June 2027 may be important in determining how much of a future capital gain relates to the period before and after the new rules commence.
An alternative apportionment method may also be available in certain circumstances.
What about your home?
The position can be more complicated where your home has been used to produce assessable income.
For example, you may have a partial CGT liability if:
you rented your home before moving into it;
you rented out your home after moving out and cannot fully rely on the main residence absence rules;
you rent out part of your home, such as a room or granny flat; or
you use part of your home for business purposes.
In these circumstances, the CGT treatment needs to be considered carefully.
What if you first use your home to produce income?
There is already a special CGT rule that applies in certain circumstances when a main residence is first used to produce assessable income.
Where the requirements are met, the property is treated as having been acquired at its market value at the time it was first used to produce income.
For example, this may apply when you first start renting out your home or begin using part of the property for business purposes.
This means that the relevant valuation date may be the date the property was first used to produce income, rather than 30 June 2027.
So, do you need a valuation on 30 June 2027?
Not necessarily.
A 30 June 2027 valuation may be important for some property owners, but it will depend on the property's individual circumstances and CGT history.
The interaction between the new CGT transition rules, the main residence exemption, the absence rules and the existing "first use to produce income" rule can be complicated.
It is therefore important to consider the position before 30 June 2027, particularly if your home has been rented out, partly used to produce income, or is likely to be used to produce income in the future.
If you own a property that has been used to generate income, contact us to discuss your circumstances and whether a valuation may be required.
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