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1 July 2027

Home Becomes a Rental - CGT & the 2027 Reform

Owner-occupiers often assume CGT is someone else’s problem. The most common way that changes is quiet: you move out and rent your home — for a job move, a new relationship, a bigger house, or to hold the old one as an investment.

The existing rule: first income use
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Under long-standing rules, when a main residence first starts producing income, the property is generally treated as if you acquired it at its market value on that day for CGT purposes. From that moment, part of the property’s story sits inside the CGT system — and the number that matters is a market value from a date nobody usually documents.

This rule exists today, reform or no reform. Thousands of owners discover it years later, when they sell and their accountant asks: “What was it worth when you first rented it out?”

How the 1 July 2027 reform adds to this
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The reform’s cost base reset applies to property held on 30 June 2027 that is within scope — broadly, income-producing property of individuals, trusts and partnerships. For a home that becomes a rental, two dates can now both matter:

  • The first income date — market value when it first earned income (existing rule).
  • 1 July 2027 — the reform’s deemed reacquisition at market value, if the property is in scope at that time.

Which rules apply, and how they interact, depends on your timing and facts — this is squarely a question for a registered tax professional. What is common to every scenario is evidence: a dated market value is much easier to establish at the time than years afterwards.

What to do if this might be you
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  1. If your home already earns income (even a rented room — partial use can matter), ask your accountant what value evidence you should hold.
  2. If you might rent your home out in the future, keep records now: photos, improvements, and consider valuation evidence when the change happens.
  3. Read who is affected and the valuation pathways comparison.

Common questions
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I rented my home for one year, then moved back in. Does CGT still apply?
Possibly, in part — income use generally brings a portion of the ownership period into CGT, though exemptions (such as the absence rule) can change the outcome. The interaction is fact-specific: ask a registered tax professional.
Does renting a room count as income use?
It can — partial income use can require apportionment for CGT, supported by evidence of value and floor area. Ask your accountant before assuming the main-residence exemption fully protects you.
What evidence should I have from the first rental date?
A dated, independent market valuation is the cleanest. Failing that: comparable sales from that period, the rental listing, photos and condition records — anything that helps a valuer reconstruct the value later (a retrospective valuation).
Is my home caught by the 1 July 2027 reform while I live in it?
A main residence that never earns income is generally outside the legislated reform’s scope. It’s the change of use that pulls a home into CGT territory — which is why owner-occupiers who may rent later should still pay attention.

Important
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General education only — not tax, financial, legal or valuation advice. The main-residence exemption, absence rule and reform interactions are fact-specific. Speak with a registered tax professional.