The Treasury released a draft legislative instrument on 4 August 2026, outlining the method for apportioning capital gains tax (CGT) valuation. This method is a formula-based alternative to market valuation, as flagged under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.
The draft instrument, known as the Income Tax Assessment (Method for Apportioning Capital Gains and Capital Losses) Determination 2026, applies to real property and other assets without a readily ascertainable market value.
Features of the Apportioning Method
This method can only be used when an asset is actually sold in the future, not before. It estimates a hypothetical value as of July 1, 2027, by calculating backward from the final sale price with a steady growth rate applied over the entire ownership period.
Public feedback on the draft ends on August 21, 2026, and the proposal is not yet law. The key dates, July 1, 2027, for the assumed disposal and reacquisition, and June 30, 2027, for asset classification, remain the same as originally set.
Limitations of the Apportioning Method
The apportioning method assumes a constant, straight-line rate of growth over the entire time an asset is held. However, property values do not always move in a straight line, and the formula can produce a higher or lower taxable gain depending on the actual value trajectory.
Because the method can only be calculated once an asset is sold, it does not provide certainty for property owners at 1 July 2027. Instead, it provides certainty only in hindsight, potentially years or decades later, using evidence that may be harder to source and easier to dispute over time.
The biggest concerns arise for investors with multiple properties, commercial or rural land, or assets in detailed ownership structures, where a single average growth rate is unlikely to match real market fluctuations.
An independent valuation conducted on July 1, 2027, by a certified appraiser using up-to-date data and sound methods remains the surest way to establish an accurate property value, reflecting its true state rather than a theoretical growth model.
Some firms, such as certain consulting companies, are offering early bookings for valuations to help property owners plan ahead of the 1 July 2027 changeover.
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