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The 30 June 2027 Reset: Is Your Capital Works Program on the Right Side of It?

Summary: From 1 July 2027, Australia’s capital gains tax rules change significantly. Broadly, value accrued before that date remains within the current CGT framework, while value accruing afterwards falls under the new regime when ultimately realised. For property owners considering refurbishment or repositioning projects, timing may influence after-tax outcomes as well as construction and commercial outcomes. The benefit can be meaningful, but only where genuine value is created and properly evidenced.

By Matt Holmes, CEO, Helm Asset Advisory

What is changing

The Federal Government enacted major capital gains tax reforms in June 2026. From 1 July 2027, the 50% CGT discount will generally be replaced for Australian resident individuals, trusts and individual partners in partnerships by an inflation-based cost base indexation method and a minimum tax outcome for affected capital gains. Investors in qualifying new residential builds may have access to different treatment under the new rules.

Importantly, the reforms are prospective. Treasury and the ATO have both confirmed that gains accrued before 1 July 2027 retain the existing treatment, while gains accruing after that date are subject to the new rules when a later CGT event occurs.

This makes 30 June 2027 an important valuation and planning date, rather than a hard deadline by which assets must be sold.

Why the timing of works matters

The reform effectively separates value accumulated before and after the commencement date.

For many owners, the question becomes whether commercially justified capital works can be completed and reflected in the property’s market value before 30 June 2027.

Where a refurbishment, repositioning program or major upgrade generates genuine value above inflation, the current CGT treatment is generally more favourable than the new indexation regime. The higher the real return generated by the improvement, the greater the potential difference in after-tax outcomes.

This should not drive a project that otherwise does not make commercial sense. However, where works are already justified by leasing, operational, compliance or value-creation objectives, timing may become an additional consideration.

What could it be worth?

The answer depends entirely on the asset, ownership structure, holding period, inflation assumptions and future disposal date.

Our modelling suggests that a commercially successful refurbishment program completed before the transition date may produce a meaningful future tax benefit for higher-rate taxpayers compared with completing the same works after the commencement of the new regime.

The benefit is generally a secondary consideration rather than a primary driver. If a project only makes sense because of a tax outcome, it probably does not stand up on commercial grounds.

The valuation challenge

The tax benefit is only valuable if it can be demonstrated.

Treasury has released draft materials dealing with the apportionment of gains for real property and assets without a readily ascertainable market value. Depending on the final form of those rules, formula-based approaches may not always recognise capital improvements in the same way as a contemporaneous market valuation.

For that reason, owners undertaking significant works should consider:

• Obtaining an independent valuation as at 30 June 2027.
• Retaining complete records of capital works expenditure.
• Maintaining photographic records, certificates and completion documentation.
• Ensuring commercially justified projects reach practical completion with sufficient time for their value contribution to be demonstrated.

Incomplete or partially completed works may not translate directly into market value at the valuation date, reinforcing the importance of planning ahead.

Trusts and SMSFs

Trusts

The CGT reforms and the proposed trust reforms are separate measures.

A separate 30% minimum tax for discretionary trusts has been announced to commence from 1 July 2028, subject to the final legislation and applicable exemptions. Owners using trust structures should seek advice specific to their circumstances, particularly where capital gains distributions form part of a broader family or succession strategy.

SMSFs

Complying superannuation funds, including complying SMSFs, continue to have access to their existing one-third CGT discount where the relevant conditions are met.

For SMSFs holding property under a Limited Recourse Borrowing Arrangement (LRBA), separate rules must also be considered. Borrowed funds under an LRBA may generally be used for acquisition costs, maintenance and repairs, but cannot be used to fund improvements to the asset.

In addition, since 10 August 2026, new SMSF LRBAs involving real property generally need to relate to business real property, subject to transitional arrangements and existing commitments.

The non-tax case for acting sooner

Tax should rarely be the primary reason for undertaking capital works.

Construction costs continue to rise, approval timeframes remain uncertain, and delivery risks generally increase as projects are delayed. In many cases, rent growth, improved occupancy, operational efficiency or reduced maintenance risk may have a greater financial impact than the eventual tax outcome.

The strongest reason to proceed with a refurbishment remains the commercial one. The potential tax benefit is simply an additional consideration.

What owners should do now

Review
Identify refurbishment and upgrade opportunities that are already commercially justified.

Plan
Allow sufficient time for design, approvals, procurement and construction if completion before 30 June 2027 is important.

Evidence
Establish a records file for capital works expenditure and supporting project documentation.

Value
Consider obtaining an independent valuation as at 30 June 2027, particularly where recent improvements may have materially affected value.

Seek Advice
Work with qualified tax, legal and financial advisers to understand how the reforms apply to your ownership structure.

Final thoughts

The approaching CGT transition should not drive investment decisions. Commercial fundamentals still come first.

However, for owners already planning capital improvements, the timing of those works may now influence future after-tax outcomes. With less than a year remaining before 30 June 2027, projects that genuinely create value may benefit from careful planning, sound documentation and a clear understanding of how that value will ultimately be measured.

At Helm Asset Advisory, we help private and institutional owners plan and deliver capital works programs that align commercial objectives, asset performance and long-term ownership strategies.

General information only. This article is not tax, legal or financial advice. Readers should obtain advice specific to their circumstances before making investment, structuring or taxation decisions.