Understanding the CGT Changes
Recent and proposed changes to how Capital Gains Tax is calculated on property have put a new level of importance on one specific figure: the market value of a property at a relevant date. Rather than relying only on a simple apportionment formula, more CGT scenarios now turn on knowing precisely what a property was worth at one specific point in time — not its value today, and not a straight-line estimate between two dates.
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Understanding the CGT Changes
Recent and proposed changes to how Capital Gains Tax is calculated on property have put a new level of importance on one specific figure: the market value of a property at a relevant date. Rather than relying only on a simple apportionment formula, more CGT scenarios now turn on knowing precisely what a property was worth at one specific point in time — not its value today, and not a straight-line estimate between two dates.
Download PDF — Understanding the CGT Changes (opens in a new tab)The kinds of dates that can matter
Date of a change in use
The point at which a property moves from private to income-producing use (or the reverse) is governed by the home-first-used-to-produce-income rule, and interacts with the six-year absence rule for a former main residence.
Date of death
For inherited property, the deceased's date of death is frequently the anchor date for the beneficiary's cost base — particularly for a pre-1985 asset, or a property that was the deceased's main residence.
Date of a related-party transaction
Gifts and other non-arm's-length transfers are generally assessed using the market value at the date of the transaction, under the market value substitution rule — not the amount, if any, that actually changed hands.
A legislative start date
Where legislation itself changes, it typically nominates its own effective date, and property owners affected by the change may need a valuation as at that date to establish their position under the new rules.
Who may be affected
- •Property owners with an investment property
- •Owners whose home has changed between private and income-producing use
- •Executors and beneficiaries of a deceased estate
- •Parties to a related-party property transfer
- •SMSF trustees transacting in property
Why the valuation date matters so much
Property values don't move in a straight line — a property bought years ago may have moved through periods of faster and slower growth, plateaus, or even declines. A straight-line apportionment between two dates can produce a very different figure to the property's actual market value at the relevant date. That difference can directly affect the size of a capital gain or loss calculated at sale.
A general note on keeping records
Because so much of this turns on a specific date, the general position on CGT record-keeping is that records need to be kept for as long as you own the asset, plus five years after you dispose of it. Whatever change prompts the need for a valuation, keeping a copy of the report — along with supporting documents like purchase contracts, renovation records and any prior valuations — makes any later review far more straightforward.
What to do next
If you think a change in your property's use or ownership may fall within these changes, the first step is usually a conversation with your accountant or tax adviser, followed by obtaining an independent valuation as at the relevant date if one is required.
Guide disclaimer: This does not constitute tax advice. Property owners should obtain independent taxation advice specific to their circumstances, including confirmation of which valuation date applies to them.
FAQs
Generally only if your home has changed between private and income-producing use, for example if you've rented out all or part of it. A straightforward, continuously owner-occupied home is less likely to be affected by date-specific CGT rules like these, though it's worth confirming your own circumstances with your adviser rather than assuming.
