Forty years of tax free gains, about to be fixed on the value of a single day. Make sure it is valued for everything it can be.
For property held since before September 1985, the market value set on 1 July 2027 becomes its permanent cost base. Everything that built up over the decades before stays exempt, and only growth above that value is taxed afterwards. The higher and more defensible the value on the day, the more is locked in exempt, for good. This is the sharpest case of all, and the one where a thin valuation costs the most.
More than forty years of exemption, settled on one date
Property bought before September 1985 has been exempt from capital gains tax the whole time. Under the 2026 Budget that changes. On 1 July 2027 each building is given a market value that becomes its permanent tax base. Gains up to that date stay exempt, and growth above the value is taxed from then on. So the condition, income and arguable potential of the building on one single day decide the tax position for good. A low, lazy number locks in a low base. A full, well argued value locks in more exempt gain and a higher base, permanently.
Before 1985
Bought and heldExempt from capital gains tax throughout
1 July 2027
The resetMarket value on the day becomes the permanent tax base
After
Taxed on growthAll future gain above that base is taxable
These are announced measures, subject to the enabling legislation. The tax position is confirmed by the client's accountant; we provide the property work and the valuation pathway beneath that advice.
The decision in front of them
One building, two futures
A ten unit block held since before 1985, original condition, ten units at $560 a week. The same building and the same date. The only difference is what happens before it.
The same building, valued on the same day.
Path one: do nothingThe building is valued in original condition. A $6.0M base is locked in for good, and every future dollar of growth is taxed from that low figure.
Path two: act in the next 12 monthsRenovated within the rules and re let at market, rents move from $560 to $800 a week. Valued renovated, the base locks in at $9.1M: about $3.1M more, tax free, for around $650,000 of works.
Path three: sell before the dateUnder the current exemption the whole gain is tax free. For some clients this is the right answer, and we say so. Stage 1 exists to tell each owner which path fits.
Hypothetical and illustrative. The renovated rent is set at or below the Randwick unit median of approximately $800 to $875 a week (2026, Domain and propertyvalue.com.au); the original rent reflects a below market holdover tenancy; capitalisation rates are assumed. Outcomes depend on the client's circumstances and are confirmed by their accountant.
+$124,800More income every year, ten units from $560 to $800 a week
+$3.1MAdded to the value, the same building on market rents
About 4.7xValue created for every dollar of works, on this example
Tax freeThe uplift sits inside the 1 July 2027 cost base, for good
Recognising them
What pre 1985 owners typically hold
"Do you or your family hold any property that you bought before September 1985 and have held ever since?"
What they own
A whole residential block, often 4 to 30 units, on a single title
A strip shop with flats above, held in the family for decades
A commercial or industrial building owned since the 1970s
What they say
"I can't sell it because of the tax."
"The rents are low but it covers itself."
"It's never been properly done up."
The strip shop with flats above is the classic case: tired retail at street level, dated flats over it, all on one old title. It is often the single asset where the gap between the lazy value and the full value is widest, because both the shop and the flats can be lifted and the mix improved.
Where the value hides
More than a renovation
Value the owner has stopped seeing usually sits in one of a few places. Rent that has drifted below market through long, loyal tenancies, and can be brought up. Improvement that is allowed within the planning and building rules before heavier approvals are triggered. And, most overlooked, a better use for the building itself. Remixing the tenants, or introducing a more resilient use such as a medical or allied health component, can lift income and make it far stickier. A medical tenant fits out heavily, stays for the long term and rarely leaves, which steadies the income and lifts the value a valuer will place on the building. Sometimes the gain is not a renovation at all, it is putting the right use into the right space. The occasional building, of course, is simply better sold, and we will say so.
And where there is value to capture, we do not just point to it. We bring the people to deliver it. Our builders and fitout teams upgrade the lobbies, common areas and bathrooms and lift the presentation, and where it fits we introduce a higher and better use such as medical or allied health. The independent valuer then values the building for what it has become, ahead of the date.
How it happens
Two stages, and a fee tied to the result
Stage 1
Asset Value Review
We assess the property and establish whether there is a strong case for a meaningful lift in value, and give you a clear report. In plain terms, a health check for the building.
STRONG CASE?
The decision
Stage 2
Delivery
We assemble the delivery team and the execution plan. The owner engages the trades and an independent project manager directly, and the works are carried out before the date.
value rises
The result
A higher value, fixed
An independent valuer confirms the new value at 1 July 2027.
How the uplift in value is shared:
Your client keeps the uplift, 97.5%
Our back end fee is a small share of the uplift, paid only when a valuer confirms it2.5% ▲
The pathway
Value early, value well
The move is the same for every pre 1985 owner. Get an independent valuer engaged early, ahead of the queue. Use Stage 1 to build the case for rent reversion, a sensible upgrade and the best use, then bring our builders and fitout teams to deliver it, so the valuer can fix a full and defensible value at 1 July 2027. Where works make sense, they need to be substantially complete by the date for the higher value to be captured, which is why the decision is a now decision. An owner on their own cannot assemble a valuer, a delivery team and a repositioning strategy and execute it in time. The curated ecosystem is exactly that, ready to move. The full process, the fee schedule and the worked examples are available on request.
Refer a pre 1985 owner
Email the suburb and the year they bought, nothing more. We will tell you whether they are affected and roughly what is at stake. No paperwork, no commitment, and you remain their lead adviser throughout.