Selling an Investment Property in Australia: Tax, Tenants and Timing Under the 2027 Tax Rules

Selling an investment property involves three distinct moving parts that rarely move at the same speed: the tax position you need to understand before you act, the tenancy obligations you must meet before you can settle, and the timing decisions that sit across both. This article covers each in turn, with pointers to your accountant and solicitor for the parts that turn on your individual circumstances.

This edition is written as at 28 August 2026. It replaces our earlier guide, which described the capital gains tax (CGT) changes as announced policy. Those changes are now law.

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What Changed

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026 as Act No. 49 of 2026. For CGT events from 1 July 2027, it replaces the 50% CGT discount with cost base indexation for resident individuals, trusts and partners, plus a 30% minimum tax for resident individuals. Gains built up before that date keep the old discount treatment, new residential dwellings keep the 50% discount, and negative gearing is limited for established residential dwellings last acquired (by contract date) after 7.30 pm ACT legal time on 12 May 2026.

Two details are still drafts: the method for apportioning a gain without a valuation, and the definition of a "new" dwelling. Until 1 July 2027 the existing rules continue to apply to sales.

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Part One: Tax

The tax treatment of an investment property sale is governed primarily by the CGT rules. The key variables are when the CGT event happens, how long you have owned the asset, whether it was ever your main residence and what depreciation you have claimed. All of these interact, and the right starting point is always a conversation with your accountant.

When the CGT Event Happens

The ATO's CGT events page states that where there is a contract of sale, the CGT event happens on the contract date, not settlement. The date you sign and exchange contracts determines which financial year the gain falls into, even if settlement happens months later. It is also the date that decides whether the new rules apply.

CGT Events Before 1 July 2027

The ATO's CGT discount page states that Australian resident individuals are entitled to a 50% discount on a capital gain where the asset was held for at least 12 months before the CGT event, excluding both the acquisition day and the event day. A gain of $200,000 would be reduced to $100,000 before being added to your assessable income.

Companies cannot use the CGT discount. The ATO notes the discount is also reduced for foreign and temporary residents in respect of gains arising after 8 May 2012.

CGT Events From 1 July 2027

For these events the Act replaces the 50% discount with indexation of the cost base (an allowance for inflation) for resident individuals, trusts and partners, plus a 30% minimum tax that applies to resident individuals only. Complying super funds are unchanged. Foreign and temporary residents get no indexation; a minimum tax for them is left to a further tranche of legislation.

The Gain Built Up Before 1 July 2027

If you bought before 1 July 2027 and sell after it, the property is deemed to be sold just before 1 July 2027 and reacquired on 1 July 2027. The gain to that point is deferred until you actually sell, and the old 50% discount rules apply to it. The later gain is taxed under the new rules.

By default, the deemed sale proceeds are the property's market value just before 1 July 2027. Instead, you can choose an apportioning method set by the Minister, at lodgment for the year of sale. That method is still a draft as at August 2026. It assumes constant compounding growth over the holding period and is limited to real property and assets without a readily ascertainable value. Treasury describes it as an alternative to obtaining a formal market valuation.

A Note on Valuations at 30 June 2027

Because the default measure is market value just before 1 July 2027, a valuation at that time may be useful even if you have no plan to sell soon. It gives a dated figure to compare against the apportioning method later. The Act does not say who must prepare it, and the explanatory memorandum, Treasury's draft and the ATO pages set no qualified-valuer requirement. Ask your accountant what evidence of value they would want on file.

New Residential Dwellings

New residential dwellings keep the 50% discount, but the definition of a new dwelling for both the negative gearing and CGT rules is not yet settled. For negative gearing, the Act leaves it to a Ministerial instrument. Treasury's draft uses 24 months after the certificate of occupancy, and the Treasurer has said the final definition will be in primary legislation; consultation on the Tax Reform No. 3 exposure draft closed on 21 August 2026. Do not assume a recently built property qualifies.

Pre-CGT Assets

Assets acquired before CGT began on 20 September 1985 have been exempt. Under the new rules from 1 July 2027, the Act removes that exemption for every type of owner, including companies. If you hold such a property, ask your accountant how the change applies.

Negative Gearing Losses and Your Capital Gain

From 2027-28, net losses on residential dwellings held for accommodation are not deductible and become a "quarantined amount". Dwellings last acquired before 7.30 pm, by legal time in the ACT, on 12 May 2026 are grandfathered (for a contract purchase, ownership starts on the contract date), as are new dwellings and a few other categories.

For sellers, the quarantined amount first offsets net income from grandfathered or new dwellings, is then applied against residential capital gains, and any remainder carries forward.

If you are selling an inherited property, note that the Tax Reform No. 2 Act 2026 (Act No. 71 of 2026, assented to on 26 August 2026) preserves a property's grandfathered or new-dwelling status when it passes on death or after a relationship breakdown.

The 6-Year Rule

The ATO states that a former main residence can continue to be treated as your main residence for CGT purposes for up to six years if it produces rental income during your absence (indefinitely if it is not income-producing). This means a property you once lived in and then rented out may still be fully CGT-exempt, subject to conditions.

The key constraints are:

• Only one property can be treated as your main residence at a time, with an overlap allowance of up to six months when you are in the process of moving.
• The six-year clock resets each time you move back in and re-establish it as your main residence, then leave again.
• Beyond six years of income production in a single absence, CGT applies to the excess period. The cost base is reset to market value at the time it first began earning income, and the gain is calculated from that point.

The 6-year rule is one of the more valuable provisions available to property investors, and also one of the more easily misapplied. Get specific advice from your accountant, or seek an ATO private ruling, before relying on it.

Depreciation and Balancing Adjustments

If your investment property contains depreciating assets (appliances, carpet, hot water systems and so on), selling the property triggers what the ATO's rental properties guide describes as a balancing adjustment event. The proceeds are apportioned between the building and the depreciating assets, and the difference between the termination value and the adjustable value of each depreciating asset is either assessable income or a deduction.

In simple terms: if you have been claiming depreciation on an asset that is then sold for more than its written-down value, you may have a gain to declare. A quantity surveyor can help you quantify outstanding depreciation, and your accountant handles the tax treatment.

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Part Two: Tenants

Selling a tenanted investment property requires formal notice to be given, and the rules differ by state. Getting notice wrong can delay your sale, expose you to tenant claims, or invalidate the notice entirely. Your solicitor or conveyancer should review your tenancy situation before you go to market.

Notice Periods by State

The table below summarises the minimum notice requirements for a sale requiring vacant possession in three major states. Other states have their own rules; always check the relevant state tenancy authority.

NSW: The New South Wales Government updated notice requirements from 19 May 2025. Once contracts requiring vacant possession are exchanged, notice reduces to 30 days for all agreement types. The initial notice (before exchange) depends on the agreement type as shown above.

VIC: Consumer Affairs Victoria sets the minimum at 90 days, up from the previous 60. The notice is invalid unless supporting evidence is attached: either a signed contract of sale or an agent engagement authority demonstrating the property is genuinely being marketed. A fixed-term tenancy cannot be ended early because the landlord wants to sell.

QLD: Under the RTA Queensland rules, a sale-contract notice to leave is two months for both periodic and fixed-term general tenancies. A fixed term cannot be ended early for sale; the later of the agreement end date or the two-month notice period governs.

Practical Implications of Selling with a Tenant

The notice rules have direct consequences for your sale timeline. If you have a tenant on a long fixed term and the sale requires vacant possession, you may not be able to settle until their agreement ends. Factor this into any settlement date you negotiate with a buyer.

Open inspections with a tenant in place require cooperation. Most tenancy legislation gives tenants the right to reasonable notice before inspections and limits the frequency. A cooperative tenant makes the process significantly easier; it is worth having a direct conversation early rather than relying solely on formal notice requirements.

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Part Three: Vacant vs Tenanted Sale

Not every investment property needs to be sold with vacant possession. The decision between selling vacant or with the tenant in place depends on who your target buyer is.

A vacant property is typically more attractive to an owner-occupier buyer: they can move straight in or renovate without coordinating around a lease. In an owner-occupier-dominated market, that may produce a better outcome.

A tenanted property with a lease in place and a reliable rental history is often attractive to an investor buyer. From day one, the new owner receives rental income without a vacancy period. Buyers agents frequently act for investor buyers who are looking for exactly this profile.

If your property is currently tenanted and you do not want to go through the notice process (or if the timing of vacant possession does not suit your plans), selling to investor buyers through their buyers agents may be the more practical path. See selling to investors through buyers agents for how that process works.

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Timing Considerations

Several timing decisions intersect when selling an investment property, and 1 July 2027 adds a new one. This article does not recommend selling before or after that date. These are questions for your accountant:

Before or after 1 July 2027? A contract exchanged before 1 July 2027 keeps the 50% discount on the whole gain, if you otherwise qualify. After that date the gain is split. How would each outcome compare for you, given your income, indexation and the 30% minimum tax?

Market value or apportioning? If you sell later, which measure of the pre-2027 gain suits your property, and would a valuation made at the time, just before 1 July 2027, be easier to support than a retrospective one?

New dwelling, residency and losses. Could your property count as new once the definition is settled? Are you a foreign or temporary resident? Do you have quarantined losses to apply against the gain?

CGT event date vs financial year. The contract date determines the financial year in which the gain falls. Near 30 June 2027, a few days' difference in when you exchange can also decide which set of rules applies.

Tenant notice vs settlement date. Ensure the earliest possible settlement date your buyer can be offered accounts for the full notice period. Trying to bring settlement forward after notice has been served can put you in breach of tenancy obligations.

Depreciation schedule review. Commission a depreciation schedule review from a quantity surveyor before sale if you have been claiming depreciation. The balancing adjustment needs to be calculated before your tax return is lodged; a pre-sale review avoids surprises.

You can model the cost components of your sale using the cost of selling calculator.

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Where AgentBridge Fits

AgentBridge sends each investment property brief to the buyers agents who match it, from our list of 80+, which means your property can reach investor-oriented buyers on day one rather than waiting for them to find a public listing. For a tenanted investment property, that access is particularly relevant: buyers agents often represent clients who want an income-producing asset from settlement and are comfortable transacting without vacant possession.

If your property has a tenant in place and you want to sell without triggering the vacant possession notice process, a direct distribution to investor buyers through AgentBridge is worth exploring. If you do plan to sell with vacant possession, distribution still reaches owner-occupier buyers through the agents representing them.

To understand how distribution works and whether it suits your situation, visit /resources/how-property-distribution-works-sellers-developers or get in touch.

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Sources

• Parliament of Australia, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, bill homepage and legislative history
• Treasury Laws Amendment (Tax Reform No. 1) Act 2026, text as passed by both Houses
• Federal Register of Legislation, Act No. 49 of 2026 (C2026A00049)
• Explanatory memorandum, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026
• Supplementary explanatory memorandum, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026
• ATO, Tax reform: boosting home ownership, reforming negative gearing and capital gains tax
• Treasury, consultation c2026-792170: Tax Reform No. 3 exposure draft and draft CGT apportioning method
• Treasury, draft explanatory material for the CGT apportioning method
• Treasurer, media release: consultation on the next tranche of tax reform legislation
• Federal Register of Legislation, Tax Reform No. 2 Act 2026, Act No. 71 of 2026 (C2026A00071)

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General information only, not financial, legal or taxation advice and not credit assistance. Speak to your own broker, accountant or solicitor before acting on anything here.

Previous editions: Selling an Investment Property in Australia: Tax, Tenants and Timing (2026) (Before the 2026 tax reform)