Imagine you bought an investment property in 2019, just before the pandemic. Prices surged, and now you're sitting on a $300,000 capital gain. But a new tax rule change from 1 July 2026 means the 50% CGT discount you were banking on could shrink to just 25%.
Should you sell now to lock in the old rules, or hold off and hope the market keeps rising? It's a question that's keeping many Australian property investors awake at night. Let's break down the numbers, compare your options, and help you decide.
What's actually changing with the CGT discount?
From 1 July 2026, the government is reducing the 50% CGT discount to 25% for assets held more than 12 months—but only for certain property investors. The full 50% discount still applies if:
- You're an individual with a taxable income below $120,000
- The property is your main residence (exempt from CGT entirely)
- The asset is held by a superannuation fund (discount stays at 33.3% for some)
For everyone else—investors earning above $120,000, or those with multiple properties—the discount halves. This isn't a minor tweak. For a $300,000 gain, the difference is $37,500 in extra tax (assuming a 45% marginal rate).
The table below (in prose) shows the impact:
Under the old rules, a $300,000 gain with a 50% discount means you only pay tax on $150,000. At a 45% marginal rate, that's $67,500 in CGT. Under the new rules, you pay tax on $225,000 (75% of the gain), which comes to $101,250. That's $33,750 more tax.
But here's the kicker: if you sell before 1 July 2026, the old rules still apply. If you sell after, the new rules hit. So timing is everything.
Option 1: Sell now and lock in the 50% discount
The most straightforward strategy is to sell your investment property before the 30 June 2026 deadline. This locks in the 50% CGT discount, assuming you've held the property for more than 12 months.
The numbers: Let's use the same $300,000 gain example. Selling now saves you $33,750 in tax compared to selling after 1 July. That's a significant chunk of change.
But there are trade-offs:
- Market timing: If property prices in your area are still rising, selling early means you miss out on future capital growth. If the market dips, you could be selling at a lower price than if you waited.
- Transaction costs: Selling a property costs around 2-3% in agent fees, plus legal and marketing costs. On a $1 million property, that's $20,000-$30,000.
- Refinancing implications: If you have a mortgage on the property, selling means you'll need to pay off the loan. If you're planning to buy another investment property, you'll need to refinance. Current variable rates are around 6.5% to 7.2% for investment loans, so your borrowing capacity might be lower than when you first bought.
Case study: Sarah bought a Sydney apartment in 2020 for $600,000. It's now worth $900,000. She's earning $150,000 per year. If she sells in June 2026, her $300,000 gain gets the 50% discount: $150,000 taxable, at 37% marginal rate = $55,500 CGT. If she sells in July 2026, the gain is $225,000 taxable, at 37% = $83,250 CGT. That's $27,750 extra tax.
But Sarah also loves the rental yield (4.5%) and thinks prices will rise another 5% in the next year. Selling now means missing that potential $45,000 gain. She needs to weigh the tax saving against potential capital growth.
Option 2: Hold off and ride the market
The alternative is to keep the property, accept the lower CGT discount, and hope for continued capital growth. This might make sense if:
- You believe property prices in your area will rise by more than the extra tax you'd pay
- You're not desperate for cash and can wait for a better market
- You want to keep the rental income (which is still taxable, but can offset your mortgage interest)
The numbers: Let's say you hold for one more year, and property prices rise 5%. On a $900,000 property, that's $45,000 extra gain. Even with the higher CGT rate on the original $300,000 gain, you might come out ahead.
But there's a catch: the extra gain is also subject to CGT. So if prices rise by 5%, your total gain becomes $345,000. Under the new rules, you pay tax on $258,750 (75%). At 45%, that's $116,438. Under the old rules on $300,000, you'd pay $67,500. The difference is $48,938. But you also have $45,000 more in your pocket from the price rise. Net effect: you lose $3,938 compared to selling now.
Of course, if prices rise by 10% ($90,000 extra), you're ahead. If they fall, you're worse off.
Refinancing considerations: If you hold, you might want to refinance to a lower rate while you wait. Current fixed rates for investment loans are around 5.8% to 6.2% for 1-year terms. Compare that to variable rates above 6.5%. A 0.5% rate reduction on a $600,000 loan saves you $3,000 per year. That's real money.
The ozLoan comparison platform can help you see which lenders offer the best refinancing rates for investment properties. Check our investment loan comparison guides for the latest data.
Option 3: A blended approach—sell part of your portfolio
If you own multiple properties, you don't have to sell all or nothing. Consider selling the one with the biggest gain to lock in the discount, while holding others that have less growth potential.
Example: Mark has two properties. Property A has gained $200,000; Property B has gained $50,000. If he sells Property A before June 2026, he saves $22,500 in tax (assuming 45% rate). He keeps Property B, which has less tax exposure and might still grow.
This approach also helps with refinancing. By selling one property, Mark reduces his debt-to-income ratio, making it easier to refinance the remaining property at a better rate.
What about refinancing before selling?
If you're leaning toward selling, consider refinancing first. Here's why:
- Lower interest costs: A lower rate means more of your rental income goes to paying down principal, not interest.
- Cash-out refinancing: If your property has equity, you can refinance to pull out cash for other investments or to pay down debt. But be careful—the ATO may view this as a loan for personal use, making the interest non-deductible.
- Rate comparison: As of July 2026, the best investment loan rates are around 5.8% for fixed terms. Variable rates are higher, but offer flexibility if you plan to sell soon.
The ozLoan refinancing calculator can show you how much you'd save by switching lenders.
FAQ
Q: Does the new CGT discount apply to properties I bought before the announcement? A: Yes. The rule applies to all sales after 1 July 2026, regardless of when you bought the property. If you sell after that date, the new discount applies—even if you've held the property for years.
Q: Can I avoid the new rules by selling to a related party? A: No. The ATO has anti-avoidance rules that prevent selling to family members or trusts to reset the CGT clock. The market value of the property is used, and you'd still trigger CGT on the sale.
Q: What if my income drops below $120,000 in the year I sell? A: The $120,000 threshold is based on your taxable income for the year of sale. If your income is below that, you qualify for the full 50% discount. This is a key planning opportunity—some investors might defer other income or take a sabbatical to stay under the threshold.
Q: Does the rule affect owner-occupied properties? A: No. Your main residence is exempt from CGT entirely. The new rules only affect investment properties and other assets.
Q: Should I use a mortgage broker or compare lenders myself? A: Both have merits. A broker can give personalised advice, but a comparison platform like ozLoan lets you see all options side by side. For refinancing decisions, using a home loan comparison tool can save you time and money.
Sources
- Australian Taxation Office, "Capital gains tax discount changes," 2026 Budget Papers, accessed July 2026.
- Reserve Bank of Australia, "Financial Stability Review – April 2026," RBA.gov.au.
- CoreLogic, "Monthly Property Market Update – June 2026," corelogic.com.au.
- Australian Bureau of Statistics, "Lending Indicators – May 2026," abs.gov.au.
- Property Council of Australia, "CGT Reform Impact Analysis," propertycouncil.com.au, June 2026.