In short
- If you sell before 1 July 2027 and have held the property at least 12 months, the 50 per cent discount still applies under the law today.
- For gains from 1 July 2027, the discount is replaced by indexing the cost to inflation, and a 30 per cent minimum tax can apply to Australian resident individuals.
- That minimum does not apply in an income year in which you receive the Age Pension, or another listed payment, at any time.
- So for a retiree, the year you sell can change the tax on the sale.
You have probably heard “the tax goes up in 2027”
If you are retired, or close to it, and own a rental you may let go one day, you have likely heard that capital gains tax changes in 2027. That’s true. What is less often said is that the law has an exception written for people on the Age Pension and some other payments. It can change the tax on a sale, depending on the year.
What applies now
Under the law today, if you have held a property for at least 12 months, half the gain is taxed when you sell. That is the 50 per cent discount, and it applies to a sale before 1 July 2027.
What changes from 1 July 2027
The change is already law. It just doesn’t apply yet.
For gains from 1 July 2027, the discount is replaced by indexation. That means the cost of the property is raised in line with inflation, and only the gain above that is taxed. For a property you already hold at 30 June 2027, the part of the gain up to that date is set by the property’s market value just before 1 July 2027.
The same law adds a 30 per cent minimum tax on capital gains for Australian resident individuals. Put simply, the gain the minimum covers is taxed at a rate of at least 30 per cent, before offsets, even if your other income is low. For a property you hold at 30 June 2027, the part of the gain up to that date is not covered.
The exception for people on the Age Pension
The minimum tax has an exception for people who receive certain payments. If you receive one of the listed payments at any time during the income year, the 30 per cent minimum does not apply to you for that year. The income year runs from 1 July to 30 June.
The Age Pension is on the list. So are the carer payment, the disability support pension, JobSeeker, family tax benefit, parental leave pay and some veterans’ pensions, among others. One payment at any time in the year is enough.
The cases side by side
The table sets out three cases.
| When you sell | Payment that year? | Discount | 30% minimum |
|---|---|---|---|
| Before 1 July 2027 | Either | 50% if held 12 months | Not yet |
| From 1 July 2027 | Age Pension | Indexation | Does not |
| From 1 July 2027 | None listed | Indexation | Can apply, not to gain to 30 June 2027 |
If you sell before 1 July 2027, the 50 per cent discount applies if you have held the property at least 12 months, and the minimum tax has not started, whether or not you receive a payment. If you sell from 1 July 2027 in a year you receive the Age Pension, the gain is indexed and the 30 per cent minimum does not apply. If you sell from 1 July 2027 in a year with no listed payment, the gain from 1 July 2027 is indexed and the 30 per cent minimum can apply to it.
Why the year can count
Say you are on a part pension now, but a large sale could lift your assets or income for the year. The pension rules and the tax rules then meet. Whether you still receive a payment in the year of the sale is a question for the pension rules, not the tax law. The Age Pension page explains how the two pension tests see property and the money from a sale.
This is where seeing it before you sign helps. For tax, a sale generally happens when the contract is signed, so the contract date generally decides which income year it falls in. The timing is worth looking at with your accountant before the property is listed.
My view
My own view is that holding is usually the first position to look at, and selling the last. That’s my opinion, and you may see it differently. Either way, it helps to see the tax on both paths before you choose.
One easy next step
If you would like the retirement steps laid out in order, from income to tax to the family home, the free lessons by email walk through each one in plain words. All you need is your first name and email.
Education only, not personal or financial advice.