How Property Is Valued for Capital Gains Tax

For capital gains tax, property is valued at its market value on the date the tax law specifies: the price a well-informed buyer and seller, dealing at arm’s length, would have agreed on that day. A valuer works it out from sales of comparable properties around that date, adjusted for the differences, and sets out the date, the evidence and the method in a signed report.

Most capital gains are worked out from what you paid and what you sold for, with no valuation involved. Market value only comes in where the law replaces a price, or where there was no price at all.

When does capital gains tax use market value?

These are the common cases for property:

Section numbers refer to the Income Tax Assessment Act 1997. Conditions and exceptions apply to each case, for example the choice to keep treating a former home as your main residence for up to six years while it is rented. Your accountant decides which rules apply to you and at which date. CGT property valuations covers the reports that suit each case.

What does market value mean for tax?

The ATO describes market value as the estimated monetary worth of an asset on the open market at a particular time, based on its most valuable use and the amount a willing buyer and seller would agree in an arm’s length transaction. The classic Australian statement of the idea comes from the High Court’s 1907 decision in Spencer v Commonwealth, usually summarised as the price a willing but not anxious buyer would pay a willing but not anxious seller, both fully informed about the property.

Three things follow from that test:

• It is a hypothetical sale, not the real one. The question is what the market would have paid, whatever price was written into a contract between family members.
• It is fixed at a date. The ATO’s guide says the prudence of the buyer and seller is judged by the state of the market at the valuation date, not with the benefit of hindsight.
• Special value is ignored. Anything one particular buyer, such as a next-door neighbour, would pay above the market is not part of market value.

How does a valuer work out market value for CGT?

1. Confirm the purpose and the date. The ATO’s guide says a valuation should be specific to the tax provision it is for, at the date the law specifies. A valuation for a future date is not acceptable for tax.
2. Establish the property as it was on that date. Land, zoning, the dwelling, its size and condition, and any renovations or extensions since, taken from contracts, plans, building approvals, photos and old sales listings.
3. Find comparable sales from around that date. For homes and vacant land, a valuer commonly compares sales of similar properties. Each sale is adjusted for differences in land, building, condition and location, and for market movement between the sale date and the valuation date.
4. Cross-check the result. The ATO recommends a second method where possible. For leased commercial property, a valuer commonly also considers the income the property earns.
5. Write the report. At a minimum the ATO expects the purpose, the scope, details of the property, the valuation date, whether it is retrospective, any inspection date, records explaining the basis of the value, and the value.

Does a CGT valuation need an inspection?

Not always. Most CGT dates are in the past, and a property cannot be inspected as it was years ago, so the valuer relies on records either way. For a standard home or vacant lot, some owners use a desktop assessment built on sales evidence and records. An inspection adds most where the property is unusual or high value, where the building is largely unchanged since the date, or where the date is recent.

Views differ on how far to go. The ATO’s guide says that where a valuation is straightforward, the report and records may be brief. The Australian Property Institute, a professional body for valuers, describes a desktop report as an indicative value and recommends an inspected valuation where the tax system relies on the value. Which suits your return is your accountant’s call, and we tell you if we think an inspection is needed.

What changes for property held at 30 June 2027?

From 1 July 2027 the 50 per cent CGT discount is generally replaced, for Australian resident individuals, trusts and partners, by indexation of the cost base and, for individuals, a 30 per cent minimum tax rate on capital gains (Treasury Laws Amendment (Tax Reform No. 1) Act 2026). New residential dwellings and affordable housing keep a discount of at least 50 per cent. Companies are not affected: they never had the discount. The main residence exemption for your home is not changed.

To split a gain between the old and new rules, Australian resident individuals and trusts are generally treated as having sold and bought back their CGT assets just before 1 July 2027, at market value or at a value worked out under an apportioning method set by the government. You make that choice in your tax return for the year you sell.

The apportioning method was released in draft in August 2026 (Treasury consultation 3 to 21 August 2026) and, at the time of writing, had not been finalised. The draft works back from the price you eventually sell for to arrive at a value just before 1 July 2027. A valuation instead reflects the sales evidence around that date. Which gives the better result depends on the property, so ask your accountant whether a valuation at 30 June 2027 suits you.

Property acquired before 20 September 1985 and still held on 30 June 2027 is also treated as sold and bought back just before 1 July 2027. The gain up to then is disregarded, and that value becomes its cost base from then on.

A valuation at 30 June 2027 relies on sales evidence up to that date, so it is normally prepared after it. The law sets no deadline, but the evidence is easiest to gather close to the date. See 30 June 2027 valuations.

Who can prepare a valuation for CGT?

The ATO says the acceptability of a valuation usually depends on the process followed rather than who did it, but that valuations by professional valuers are more credible than those by someone who is not one. It also says that, generally, if you engage and properly instruct a professional valuer, you won’t be liable for penalties if it finds the professional valuation is deficient.

Properly instructing a valuer, in the ATO’s terms, means you can show that you have:

• set out the scope and purpose of the valuation
• acknowledged the valuer’s independence to draw conclusions and write their report
• recognised that the valuer can refuse to report if you don’t provide the information they need
• given access to the property and records, and any help needed to complete the report
• stated that the fee does not depend on the outcome.

In practice that is a written engagement. The Australian Property Institute’s Certified Practising Valuer and the Australian Valuers Institute’s Certified Property Valuer are among the designations the ATO recognises for some tax purposes.

What records should you keep?

Keep the valuation report with your other property records. The ATO says records for buying, owning and selling a property need to be kept for at least five years after you dispose of it, which for a 30 June 2027 valuation could mean decades.

Before you request a valuation, gather what you can:

• the contract of sale and settlement statement from when you bought
• plans, building approvals and invoices for renovations or extensions, with dates
• photos of the property around the valuation date, including old sales or rental listings
• for apartments and townhouses, strata records of any major works
• for rented property, the lease and the rent at the time.