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Selling Your Property to a Developer Under the 2027 Tax Rules

27 October 2026 · AgentBridge · Tax Reform Act 2026

Selling Your Property to a Developer Under the 2027 Tax Rules

Selling a home or investment property to a developer is a different transaction to selling to an owner-occupier. The price logic, the contracts and the timeline all differ and developer deals often run for a year or more between the first signature and settlement. That long timeline now matters for tax as well.

This edition is written as at 27 October 2026. It replaces our earlier guide, which did not cover the capital gains tax (CGT) changes passed in June 2026. Everything else in that guide that is still current is carried over here.

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 and property bought before CGT began (20 September 1985) loses its exempt status under the new rules.

For a sale to a developer, the question that follows is simple: on which side of 1 July 2027 does your sale fall? The answer turns on when the contract is made, which for an option is when the developer exercises it. Until 1 July 2027 the existing rules continue to apply.

When a Home Becomes Developer Stock

Most residential properties sell to another owner-occupier or a buy-and-hold investor. Developer interest emerges under specific conditions.

Rezoning and planning corridor changes are the most common trigger. When a council updates its planning scheme to allow higher density housing, mixed use or commercial development in an area that was previously low-density residential, properties within the affected zone can become viable development sites. Owners sometimes discover this when they receive an unsolicited letter or phone call from a developer or their representative.

Site size matters. Jaide Law notes that developers often need upwards of 1,000 sqm to make a project work. On a standard suburban block, this often means a developer's real interest is in the neighbouring properties as well.

Proximity to infrastructure (train stations, activity centres, employment nodes, urban renewal areas) is a recurring feature. State and local governments signal growth corridors through their strategic planning documents and developers read these closely.

If you have received an approach, the starting point is to understand whether your site has been identified as part of a broader plan or whether the interest is opportunistic. A planning consultant can pull the relevant zoning maps and strategic documents.

How Developers Approach Owners

The approach is often informal at first: a letter, a phone call, a neighbourhood meeting. The offer that follows is usually calculated using residual land value logic (see how to sell a development site in Australia). The developer estimates what the finished project will be worth, deducts construction costs, finance, professional fees and profit and arrives at the most they can justify paying for the land.

That analysis is highly sensitive to assumptions about sale prices, construction costs and timelines. Two developers can reach different values for the same site, which is why having more than one party interested is the most reliable way to test a first offer. Our guide to what a development site is worth and the site value quick-check explain the arithmetic.

Before you sign anything or grant any exclusivity, get your own independent valuation from a registered valuer. It is not the developer's job to provide one.

Option Agreements Explained

The most common structure in developer-to-homeowner transactions is an option agreement. It is not a sale contract: it is an agreement about the right to buy or sell.

Call Options and Put Options

A call option gives the developer (the buyer) the right to require you to sell at an agreed price and on agreed terms. They can choose to exercise it or walk away; you cannot.

A put option gives the vendor the right to require the developer to buy. It is less common in homeowner deals but does appear, sometimes alongside a call option.

As Brown Wright Stein Lawyers explain, when either option is exercised a binding sale contract is formed at that point.

Option Fees

An option fee is paid by the developer to the vendor for granting the option. It is usually non-refundable: if the developer does not exercise, you keep the fee. If they do exercise, the fee is usually credited against the purchase price.

Gavel and Page Lawyers describe a common option fee of around 1% of the purchase price. Brown Wright Stein cite a 5% call option fee as an example in some transactions. Fees are negotiable and tend to reflect the length of the option period and the developer's view of the risk.

NSW-Specific Rules

In New South Wales, the Conveyancing Act 1919 sets specific rules for put and call options over residential property:

  • An option is void if it can be exercised within 42 days after it is granted. The option money must then be returned.
  • The developer, as buyer, can rescind until 5 pm on the fifth business day after the option is granted, forfeiting 0.25% of the price (Conveyancing Act 1919 (NSW) ss66ZB(3), 66ZE(2)). This does not apply if the buyer's solicitor gives a certificate waiving it or the option is granted on the day of a passed-in auction. You, as the seller, have no equivalent cooling-off.
  • The proposed sale contract and the prescribed documents must be attached to the option when it is granted. If they are not, either party may rescind.
  • The contract formed when the option is exercised has no separate cooling-off period.

If you are in another state, the rules may differ. Your solicitor must advise on the state framework before you sign.

What You Can and Cannot Do During the Option Period

During the option period you generally remain in possession and can use the property as normal, subject to anything negotiated in the agreement. You cannot sell the property to anyone else, because the option gives the developer a right over it. Encumbering the title (new mortgages, caveats) without the developer's consent would typically breach the agreement.

If the developer does not exercise within the option period, the option lapses and the property is again free to sell. The expiry date and the conditions for exercise are therefore critical.

Option Periods and Timing

Option periods are usually sized around the development approval timeline. Boomscore notes that council approvals can take 12 to 18 months depending on the size of the project and its worked example uses an 18-month option period. You may be waiting 18 months or more before the developer decides whether to proceed. Make sure you can live with that timeline before you sign.

An option can be exercised at any point in the option period after day 42 (in NSW, an option that can be exercised within 42 days of being granted is void). The later it is exercised, the more likely it falls after 1 July 2027. The tax section below explains why that matters.

Delayed Settlement and Conditional Contracts

Beyond options, two other structures commonly appear in developer transactions.

Delayed settlement means a binding sale contract is signed at exchange, but settlement is pushed out 6 to 12 months or longer. You exchange today at an agreed price and the money arrives on the deferred settlement date.

Conditional contracts are binding subject to conditions such as development approval, rezoning or finance. Jaide Law notes these are common alongside delayed settlement. If a condition is not satisfied by the agreed date, the contract typically ends and the deposit is returned.

Each structure carries different risk and cash flow consequences for a vendor and each now has a different tax timing. A property solicitor (not just a conveyancer) should review any of them before you sign.

Tax: What the 2027 Rules Change for a Sale to a Developer

This section describes the rules in general terms. How they apply to you depends on how you hold the property, how you have used it and your income, so treat everything here as questions for your accountant.

The Contract Date Decides Which Rules Apply

The ATO's CGT events page states that if you sell a house, the CGT event happens on the date of the contract, not when you settle. For a delayed settlement, that means a contract exchanged before 1 July 2027 falls under the existing rules even if the money arrives in 2028. A contract exchanged on or after 1 July 2027 falls under the new rules.

If the contract is conditional (on development approval, rezoning or finance, for example), ask your accountant how the conditions affect the timing for your contract.

Options and the 1 July 2027 Line

Under an option, there is no sale contract until the option is exercised. The contract is formed on exercise, so the CGT event for the sale happens on exercise. The ATO's Guide to capital gains tax 2026 states that granting an option is itself a CGT event, but if the option is later exercised you ignore any gain from the grant. The option fee is then treated as part of the capital proceeds for the sale and the guide's worked example places the sale in the income year the option is exercised. Confirm the timing for your own agreement with your accountant.

The practical point is that an option you sign in 2026 can be exercised after 1 July 2027. If it is, the sale falls under the new rules, whenever the option was granted. If the developer never exercises, the option fee you keep is taxed on its own as the grant of an option.

Your Home and the Main Residence Exemption

If the property has been your main residence for the whole time you have owned it, the main residence exemption can remove the gain altogether. The Act does not amend those rules, although it relies on them when a gain is split between home and rental use. A sale to a developer can raise questions the exemption does not fully answer: part of the property may have been used to earn income, the land may be larger than the exemption covers or the site may be subdivided before sale. Your accountant can tell you how much of the gain, if any, is exposed.

Long-Held Property and the Gain Before 1 July 2027

Developer approaches often reach owners who have held a property for decades. For a property bought before 1 July 2027 and sold after it, the Act deems the property 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. Only the later gain is taxed under the new rules and the 30% minimum tax reaches only that later gain. Recipients of the age pension and some other payments are exempt if they receive a payment in the income year of the sale. If you bought between 20 September 1985 and 21 September 1999, the current choice of frozen indexation instead of the discount ends for sales from 1 July 2027.

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. As at 27 October 2026 that method is still a draft: Treasury released a draft Determination for consultation in August 2026 and no final Determination has been registered on the Federal Register of Legislation. The draft assumes constant compounding growth over the ownership period and is limited to real property and assets without a readily ascertainable market value. With a developer deal likely to straddle the date, a valuation around 30 June 2027 may be worth having on file. Ask your accountant what evidence they would want.

Pre-CGT Homes

Property acquired before CGT began on 20 September 1985 has been exempt. The Act removes that exemption for every type of owner, including companies, from 1 July 2027. The explanatory memorandum states that gains accrued before 1 July 2027 on these assets continue to be exempt, so only growth from that date is taxed. A pre-1985 home that has always been your main residence may still be covered by the main residence exemption.

Companies, Super Funds and Foreign Residents

The explanatory memorandum states that companies, superannuation funds and life insurance companies will not receive the new indexation or be affected by the minimum tax. Foreign and temporary residents do not get the new indexation. If you are not an Australian resident for tax purposes or you hold the property through an entity, your accountant's view is essential.

Questions for Your Accountant

This article does not recommend signing, exchanging or settling before or after 1 July 2027. These are the questions to take to your accountant:

  • On the timetable the developer proposes, on which date is the contract likely to be made and which rules would apply?
  • If the deal is an option, what happens to the tax position if it is exercised before 1 July 2027, after it or not at all?
  • How much of the gain, if any, is covered by the main residence exemption?
  • Would a market valuation just before 1 July 2027 or the apportioning method suit your property better?
  • Does GST apply to any part of the sale?

Amalgamation: Selling With Your Neighbours

In many development site transactions, the developer wants your property and your neighbours' as well. This is amalgamation: combining several lots into one larger site.

The case for neighbours selling together can be strong. A larger site allows more dwellings, more floor area, better building separation and more efficient parking and developers generally prefer dealing with one aligned group of vendors.

The Risks of Neighbour Amalgamation

Amalgamation also creates risks that do not exist in a single-property sale. Jaide Law identifies the main ones:

  • Misaligned contracts between neighbours: if one owner's contract has different conditions, timing or price mechanisms, the group's position becomes complicated. Developers often make each contract conditional on all of them settling together.
  • Ambiguous option agreements: an option that does not say what happens if one neighbour withdraws creates uncertainty for everyone. If a developer needs all five lots, one holdout can collapse the deal for the other four.
  • Settlement coordination failure: settling four or five transactions on the same day involves finance, mortgage discharges, removalists and vacant possession all lining up.
  • Tax treatment errors, especially GST: where one or more vendors are registered (or required to be registered) for GST, the GST treatment of each sale may differ.

The 2027 rules add one more point of difference. Neighbours who bought at different times, used their homes differently or hold through different structures can face very different tax outcomes from the same price and the same settlement date. Each vendor needs their own accountant's view before the group commits.

Aligning as a Group

A successful amalgamation usually starts with a shared strategy agreed before anyone engages with a developer: a price floor, a preferred structure, a shared solicitor (or solicitors who talk to each other) and a clear position on developer conditions. A fragmented group, where a developer can deal with each owner separately at different prices, gives up the advantage that alignment creates.

Common Traps

Signing exclusivity before getting a valuation. Developers sometimes ask for exclusivity early, before an offer is formalised. Granting it before you have an independent valuation removes your ability to test the market.

Not getting legal advice on the option. Option agreements are complex legal documents. They should not be signed without a solicitor who understands development transactions reviewing the full terms, including the annexed sale contract.

GST surprises. The ATO's GST and residential property page states that the sale of existing residential property is input taxed, so there is usually no GST on selling an established home. GST can apply where new residential property or potential residential land is sold in the course of an enterprise and registration is required once GST turnover reaches $75,000. If the margin scheme is to be used, the ATO requires a written agreement to use it before settlement. If you have used the property for a business purpose or are unsure of your position, speak to your accountant before signing.

Assuming the old CGT rules will apply. A long option period or a conditional contract can carry the CGT event past 1 July 2027. Ask your accountant to model the sale on the dates the contract could actually be made, not the date you first shake hands.

Leaving the ATO clearance certificate too late. Since 1 January 2025, every vendor of Australian real property, at any price, needs an ATO clearance certificate before settlement. Without one, the buyer must withhold 15% of the price and pay it to the ATO, and you can claim it back only when you lodge your tax return. This applies to Australian residents too, not just foreign residents. A certificate is valid for 12 months and you do not need a signed contract to apply, so apply early.

Assuming a neighbour is aligned when they are not. Before telling a developer you are organising a group, have a frank conversation with each neighbour about their timeline, price expectations and appetite for the process.

Not understanding what happens if the developer does not exercise. If the option lapses, are there any restrictions on selling to someone else? Does the agreement contain a right of first refusal? These terms can limit your choices after an option period ends.

Where AgentBridge Fits

If you want to test the market before or instead of a one-on-one negotiation with a single developer, AgentBridge can help. AgentBridge sends one brief, at once, to the buyers agents who match the property or site, from our list of 80+, rather than listing it with a single agent. Buyers agents act for investors and developers looking for sites, so more than one party can see the opportunity at the same time.

Offers come through AgentBridge and go straight to you. You decide and your solicitor handles the contract. AgentBridge's distribution fee is set out on the fees page.

To understand how distribution works, read how property distribution works for sellers and developers and project marketing, channel sales and distribution compared or get in touch. The cost of selling calculator models the other costs of a sale.

Sources

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

Previous editions: Selling Your Property to a Developer: Options, Settlements and Amalgamation (2026) (Before the 2026 tax reform)

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