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1 July 2027

Pre-1985 Property CGT Exemption — and How It Ends on 1 July 2027

For forty years, one rule was simple: assets acquired before 20 September 1985 sat outside capital gains tax entirely. The legislated 1 July 2027 reform changes that for the first time.

What changes for pre-CGT property
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Under the reform, the blanket exemption for pre-20 September 1985 assets ends for gains that accrue after 1 July 2027. Growth up to that date stays outside CGT — but growth after it does not.

To make that split possible, pre-1985 property receives a deemed cost base equal to its market value just before 1 July 2027 — the end of 30 June 2027, the same deemed disposal-and-reacquisition mechanism that applies to other property held on 30 June 2027.

Why this group has the most at stake in evidence terms
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  • The gap between purchase price and today’s value is largest. A property bought in 1980 may have appreciated for four decades entirely CGT-free — every dollar of that history is protected only by evidence of the 1 July 2027 value.
  • There is often no other number. Later buyers have contract prices; pre-1985 owners frequently have nothing between a decades-old purchase and the reform date.
  • Estates compound the problem. Long-held property is disproportionately owned by older Australians; executors may face both the reform rules and date-of-death rules in the same file.

If the owner dies: the exemption already ends, at a different date
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This is the most common way pre-1985 property changes hands, and it works differently from everything above.

When a pre-CGT property passes on death, it does not stay pre-CGT in the beneficiary’s hands. Under the ATO’s rules on the cost base of inherited assets, where the deceased acquired the asset before 20 September 1985, the first element of the beneficiary’s cost base is the market value of the property on the day the deceased died. The exemption ends there, whatever happens in 2027.

Two consequences follow, and they are easy to miss:

  • A date-of-death valuation is the evidence. That market value has to come from somewhere, and it is usually established by a valuation arranged by the executor or legal personal representative. Reconstructing it years later, from a date nobody documented, is the same problem this whole site is about — arriving earlier.
  • Improvements made after September 1985 are not a separate asset here. Where the deceased made a major improvement on or after 20 September 1985, the ATO treats the property as one asset, and the cost base is the market value including that improvement at the date of death. That differs from the treatment while the owner is living, where post-1985 improvements to a pre-CGT property can be a separate CGT asset.

Where 1 July 2027 comes in. If the owner is still living and still holds the property on 30 June 2027, the reset value applies and the relevant date is 1 July 2027. If they die before then, the relevant date is the date of death. Either way the answer is a market value at a specific past date — the dates are simply different, and an estate that spans the reform may need to establish both.

Confirm your own position with a registered tax professional; this is general information.

There is a free alternative — and pre-1985 owners are the group it suits least
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A valuation is not compulsory. Treasury has released a draft determination setting out an apportioning method a taxpayer can elect to use instead. It takes the original purchase price, the purchase date and the eventual sale price, assumes the property grew at one steady rate across the whole period, and works the 1 July 2027 value out from that.

For many owners that is a reasonable deal, and it costs nothing. For pre-1985 property it is usually the least suitable option available, for two reasons that compound.

The assumption has the furthest to stretch. A property held since 1980 has close to fifty years of history before the reform date, and Australian property did not grow at one steady rate across that span — the late 1980s, the 2000s and the early 2020s each looked very different. The longer and less even the history, the further a single averaged rate can land from what the property was actually worth in 2027.

There is no second chance to make it up. For property bought after September 1985, the 1 July 2027 value splits a gain in two: understate it, and some gain moves from a more favourable period into a less favourable one. Bad, but partly offset. For genuinely pre-CGT property the gain before 1 July 2027 is disregarded altogether — so the 2027 figure is not splitting anything. It is purely your cost base. Every dollar it is understated by is a dollar added to the gain you are eventually taxed on, with nothing on the other side of the ledger.

On a long-held, unevenly-grown property the gap between the two routes can run well into six figures. Which is better depends entirely on your property’s own history — a question for your accountant. But it is worth asking before assuming the free option is the simple one.

What owners can do now
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  1. Confirm with a registered tax professional whether your property is genuinely pre-CGT (acquisition date, ownership changes, and improvements can all matter).
  2. Organise the property’s records — title history, improvements, leases.
  3. Plan for dated market-value evidence as at the end of 30 June 2027 (the market value just before 1 July 2027). A contemporaneous, independent valuation around the date itself is the cleanest evidence; a retrospective valuation later is possible but gets harder as sales evidence ages.
  4. Compare the valuation pathways when you’re ready.

Common questions
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Is my pre-1985 property still exempt before 1 July 2027?
Under the legislated reform, gains accrued up to 1 July 2027 remain outside CGT for genuinely pre-CGT assets. It is the growth after that date that becomes taxable. Confirm your property’s status with a registered tax professional.
What if I renovated or subdivided since 1985?
Major capital improvements or ownership changes can affect pre-CGT status under existing rules — some assets are already partly inside CGT. This is exactly the kind of detail to check with your accountant before assuming exemption.
Do I need a valuation on exactly 1 July 2027?
The value that matters is market value just before 1 July 2027 — the end of 30 June 2027, which is when the law deems the sale to happen. Valuers establish it using sales evidence from around that date, so reports are typically delivered from July 2027 onward — and can be prepared retrospectively later, at greater difficulty and cost.
What happens if I never get a valuation?
You would either reconstruct the value retrospectively — harder and more expensive once sales evidence has gone cold — or elect Treasury’s draft apportioning method, which is free but assumes steady growth across your whole ownership period. For property held since before 1985 that assumption stretches across decades, and because the pre-2027 gain is disregarded, the resulting figure is purely your cost base: any understatement adds directly to the gain you are taxed on. Worth modelling both with your accountant rather than defaulting to either.
Is the free formula final?
No. The apportioning method is an exposure draft — consultation ran to 21 August 2026 — and may change before it is made. Anything you read about it — here or elsewhere — should be checked against the final instrument.

▶ Watch: these questions explained
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Is my pre-1985 property still exempt before 1 July 2027?
What if I renovated or subdivided since 1985?

Important
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This page is general education only — not tax, financial, legal or valuation advice. Pre-CGT status and the reform’s application depend on your specific facts. Speak with a registered tax professional.