For more than forty years, an asset acquired before 20 September 1985 has sat outside the capital gains tax system entirely. That ends on 1 July 2027. Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, every pre-CGT asset is treated as sold and reacquired at that date. The gain built up to then stays tax-free. Growth from then on is taxable.
If your family holds a farm, a holiday house, a block of land or a parcel of shares from before 1985, this is the part of the 2027 CGT changes that affects you most.
The pre-CGT changes at a glance
- From 1 July 2027 there are no pre-CGT assets
- Each one is treated as reacquired at its market value at that date, or at a value set by an apportionment method
- Gains accrued before 1 July 2027 remain exempt
- Only growth after 1 July 2027 is taxed, and only when you actually sell
- The change applies to every type of owner, including companies
Who holds pre-CGT assets?
- Family farms and rural land
- Holiday houses, vacant land and investment properties held since before 1985
- Shares bought before 1985, often still in the name of an elderly parent
- Shares in a family company, or units in a family unit trust, set up before 1985
- Goodwill of a business that started before 1985
- Art, antiques and other collectables
How the 1 July 2027 reset works
On 1 July 2027 each pre-CGT asset is treated as if it had been sold and bought back. No tax is payable on that day. The value at that date becomes the asset’s cost base. When the asset is eventually sold, only the increase above that value is a capital gain.
For individuals and trusts, that later gain is taxed under the new rules: the cost base is indexed for inflation and the 30% minimum tax applies.
Take a farm bought in 1978 for $150,000 and worth $3,000,000 at 1 July 2027. It is sold in 2035 for $4,000,000, and inflation over those eight years is 15%.
| Amount | |
|---|---|
| Gain from 1978 to 30 June 2027 | $2,850,000, exempt |
| Cost base at 1 July 2027 | $3,000,000 |
| Indexed cost base at sale (15% inflation) | $3,450,000 |
| Taxable capital gain in 2035 | $550,000 |
Why the valuation matters so much
For a pre-CGT asset, every dollar of value at 1 July 2027 is a dollar of gain that stays tax-free. If the farm above were recorded at $2,600,000 instead of $3,000,000, another $400,000 of gain would move into the taxable period.
Market value is the default measure. The alternative apportionment formula spreads growth evenly between purchase and sale. For an asset held since the 1970s or 1980s, that can give a very different answer from the true value, in either direction. A properly supported valuation as at 1 July 2027 gives you the choice.
Three practical points:
- Get the valuation done close to the date. Reconstructing a 2027 value in 2040 is harder, dearer and easier to challenge.
- Use a qualified, independent valuer. An agent’s appraisal letter will not carry much weight with the ATO.
- Keep it with the title deeds or share certificates. The person who needs it may be your executor or your children.
Should you sell or transfer before 1 July 2027?
In most cases, no.
A sale before 1 July 2027 is entirely CGT-free. A sale after that date is taxed only on growth since 1 July 2027. There is no cliff edge, and the reset gives you a market value cost base without you having to do anything.
For the same reason, transferring an asset to your children before the date simply to lock in the exemption achieves little. They would take a market value cost base under the current rules, which is what the reset gives you anyway, and the transfer usually costs stamp duty.
It deserves a closer look where:
- You were already planning to sell or hand over. Completing before 1 July 2027 keeps the outcome simple. The CGT event generally happens on the contract date, not at settlement.
- The asset is shares or units in a private company or trust. Existing rules can already tax pre-CGT interests where the entity mainly holds assets acquired after 1985, or where the underlying ownership has changed. The reset interacts with those rules, so get advice before any transfer, buy-back or restructure.
- Your estate plan assumes a tax-free asset. A will that leaves the farm to one child and equivalent cash to another needs another look once the farm starts to carry a tax liability on future growth.
Improvements made after 1985
A major capital improvement made to a pre-CGT asset after 20 September 1985, such as a new building on old land, can already be a separate post-CGT asset with its own cost base. That has not changed. Keep the records of what was spent, and when, alongside the valuation.
What owners of pre-CGT assets should do now
- Identify every asset acquired before 20 September 1985. The date that counts is the contract date.
- Gather evidence of the acquisition date: old contracts, certificates of title, share certificates and early dividend statements.
- Arrange a valuation as at 1 July 2027 for anything of real value.
- Collect records of improvements made since 1985.
- Review wills and succession plans with the changed tax position in mind.
- Do not rush to sell or transfer on tax grounds alone.
Common questions about pre-CGT assets
Will I pay tax on 1 July 2027?
No. The sale and reacquisition is notional. Tax arises only when the asset is actually sold or otherwise disposed of after that date.
Is the gain since 1985 now taxable?
No. Everything that accrued before 1 July 2027 remains exempt. Only growth after that date is taxed.
My home was bought in 1980. Is it affected?
Your main residence remains exempt under the main residence rules, whatever its acquisition date.
Do companies holding pre-CGT assets get the reset too?
Yes. The change applies to all owners. Companies are not entitled to indexation, so their later gains are taxed without it.
Need a hand with this?
If you or your parents hold assets from before 1985, the work to do before 1 July 2027 is evidence and valuation, not selling. We can identify which assets are affected, coordinate valuations and review how the change sits with your succession plan. We are Chartered Accountants and registered tax agents in Cairnlea, in Melbourne’s west.
Related reading
- CGT discount ends 1 July 2027: indexation and the 30% minimum tax
- CGT valuation at 1 July 2027: market value or the formula?
- Asset protection for small business owners: what works and what doesn’t
- The 30 June tax planning checklist
- Our full range of services
Sources
- ATO – Tax reform: reforming negative gearing and capital gains tax
- Budget 2026–27 – Tax explainer: negative gearing and capital gains tax
This article is general information only and does not take your personal circumstances into account. It reflects the law and announced measures as at October 2026. Measures described as draft or proposed may change before they are enacted. Speak to us before acting on anything you read here.
