Pre-CGT assets and the 2027 changes: what ends, what stays tax-free

For forty years, anything bought before 20 September 1985 could be sold with no capital gains tax at all. The family farm, the shop building, the shares Grandad bought in 1972. That ends for future growth on 1 July 2027.

It isn't a grab at past growth. Every dollar of gain up to 1 July 2027 stays exempt, permanently. But from that date the asset is treated like any other, and the value you can prove at that date decides how much tax your family pays later. This guide covers what changes, how the cost base reset works, the trap for pre-1985 companies and trusts (CGT event K6), and what to do before 30 June 2027. Status is as at 18 October 2026.

What happens to pre-CGT assets on 1 July 2027?

Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which is law:

1. Every pre-CGT asset is treated as sold just before 1 July 2027 and reacquired on 1 July 2027.
2. The gain on that deemed sale is disregarded. The asset was pre-CGT when it was "sold", so the exemption applies to all growth up to that moment.
3. The asset is a post-CGT asset from 1 July 2027. Its cost base is its market value just before 1 July 2027, or an amount worked out under an apportionment method the Minister is yet to determine.
4. Growth after 1 July 2027 is taxable when you sell or another CGT event happens. For individuals and trusts, that cost base is indexed for inflation, and individuals face the 30% minimum tax on the post-2027 gain.

Unlike the change to the CGT discount, this applies whoever owns the asset: individuals, trusts, partnerships, companies and complying super funds.

Which assets count as pre-CGT?

The test is the date you acquired the asset, which for most purchases is the date you signed the contract, not settlement.

Common pre-CGT assets we see:

• farms and rural land held in the family since before 1985;
• commercial buildings and shops;
• listed shares bought before 1985, including parcels that have been through takeovers (each corporate action needs checking);
• shares in a family company, or units in a family trust, acquired before 1985;
• holiday houses and investment properties.

Pre-CGT status can be lost before 2027, and it's worth confirming before you pay for a valuation:

• Inherited assets. If the original owner died after 20 September 1985, the heir generally acquired the asset at its market value on the date of death. It's post-CGT in the heir's hands, with a date-of-death cost base.
• Major improvements. A capital improvement made after 1985 to a pre-CGT asset can be a separate post-CGT asset if its cost exceeds the improvement threshold, which is $194,165 for 2026–27, and is more than 5% of what you received on sale.
• Changes of ownership in a company or trust. A company or trust's pre-CGT assets stop being pre-CGT if the majority of the underlying interests changes hands (Division 149). A family that has brought in new shareholders over the years may not have the status it assumes.
• Rollovers. Some restructures preserve pre-CGT status; others don't. If an asset came to you through a rollover, such as a transfer between spouses on separation or a business restructure, we need the paperwork for that transaction too.

Our pre-CGT assets agent works through the acquisition history, inheritances and Division 149 changes to confirm status asset by asset. Your accountant reviews the evidence before anything is relied on.

How is the new cost base set?

You have two routes, and you don't have to choose until you sell the asset.

• Market value just before 1 July 2027. For land and buildings, this means a qualified valuer's report as at that date. For listed shares, the closing price. For private company shares or units in a private trust, a valuation of the underlying assets and the entity.
• The apportionment method. The law allows a method set by the Minister, but at 18 October 2026 it has not been made. The Budget explainer described it as a formula based on growth over the holding period.

For pre-CGT assets, the market value route is almost always the one to evidence. These assets have usually grown for 40 or more years, so a defensible, high value at 1 July 2027 shelters the most growth. A low or unsupported value means part of your tax-free growth gets taxed later.

Watch out: A valuation "as at 1 July 2027" done in 2035 is much weaker than one done in 2027. Property valuations are hard to reconstruct once comparable sales and the property's condition at the time are forgotten. Book it for mid-2027 now.

Worked example: the family farm

Hypothetical, rounded. Inflation assumed at 2.5% a year.

A family bought a farm in 1980 for $80,000. A formal valuation puts it at $5,000,000 just before 1 July 2027. They sell in July 2032 for $6,000,000.

Now say the family had no valuation and could only support $4,200,000. The indexed cost base drops to about $4,752,000 and the taxable gain rises to about $1,248,000. The gap in the valuation became about $905,000 of extra taxable gain.

If the farm is an active business asset, the small business CGT concessions may reduce the post-2027 gain further. Those concessions are unchanged, and from the income year that includes 1 July 2027 the turnover threshold for the 50% active asset reduction rises from $2 million to $10 million. Our farm accountants see this question often, and succession timing matters as much as the tax.

What is the K6 75% test for pre-1985 companies and trusts?

This is the part most families miss.

CGT event K6 is an anti-avoidance rule. Without it, you could hold post-CGT assets inside a company you owned before 1985 and sell the shares tax-free. K6 says: when a CGT event happens to pre-CGT shares in a company (or a pre-CGT interest in a trust), and 75% or more of the entity's net value is made up of post-CGT property, part of your gain is taxable.

On 1 July 2027 every pre-CGT share and trust interest is deemed sold. The law says that deemed sale is tested against K6. If the 75% threshold is met at that point, a K6 gain arises, deferred until you actually sell your shares or units or another CGT event happens.

Example (hypothetical): you've owned all the shares in a family company since 1983. The company owns a pre-1985 warehouse and an investment portfolio it built up after 1990. If the portfolio is worth 76% of the company's net value at 30 June 2027, K6 is in play. At 70%, it isn't.

What to do:

1. Value the company's assets as at 1 July 2027 and split them into pre-CGT and post-CGT property.
2. Run the 75% test well before 30 June 2027, not after.
3. If you're close to the line, get advice early. Changes to the balance sheet before 30 June 2027 must be genuine and commercial. Shuffling assets purely to beat the test invites the general anti-avoidance rules.
4. Keep the workings. The test will matter when you eventually sell.

The same check applies to pre-1985 units or interests in a unit trust or other trust. Our guides to unit trusts and the family trust explained cover how interests in each are held.

What happens to pre-CGT assets on death after 2027?

This is a quieter change, and it matters for estate planning.

Under the rules that apply until 30 June 2027, when someone dies holding a pre-CGT asset, the heir receives it with a cost base equal to its market value at the date of death. In effect, the whole of the deceased's growth is wiped clean for the next generation.

From 1 July 2027, the asset is no longer pre-CGT. It was deemed reacquired on that date. On our reading of the rules for post-CGT assets, an heir who inherits it after 1 July 2027 generally takes over the deceased's cost base (the 1 July 2027 value, plus any later costs) rather than getting a fresh market value at death. Growth between 1 July 2027 and the date of death passes to the heir with the tax attached. The main residence exemption and the rules for a deceased person's home are unchanged.

Three practical consequences:

• The 1 July 2027 valuation becomes the heirs' starting point too. A weak valuation costs the next generation, not just you.
• Wills deserve a look. If a pre-CGT asset is meant to pass to one child and cash to another, the tax attached to each gift is no longer equal. Our estate planning checklist covers what to raise with your solicitor.
• Executors will need records. Keep the valuation report with the will and the asset's title documents, not in a drawer only you know about.

The ATO has said it will publish more guidance before the start date. We'll confirm the detail against that guidance for each estate.

Should I sell, transfer or keep my pre-CGT asset before 30 June 2027?

There are three realistic paths.

The middle path is the one to think hard about. While an asset is still pre-CGT, transferring it costs no CGT. After 1 July 2027, the same transfer triggers tax on growth since that date. If the farm, building or portfolio should end up in a trust or company for asset protection or succession, 2026–27 is the cheapest year to move it. Stamp duty is the deciding number and varies by state; see our page on state taxes. A solicitor prepares the transfer documents; we model the tax and duty and handle the returns.

What should I gather now?

• Purchase contracts, titles, share certificates or old share registers proving acquisition before 20 September 1985
• For inherited assets: date of death, probate documents and any date-of-death valuation
• A list of capital improvements since 1985 with dates and costs
• For family companies and trusts: share registers and unit registers since 1985, so we can test Division 149
• For pre-1985 company shares: the company's balance sheet, with assets split into pre-CGT and post-CGT
• A valuer booked for a valuation as at 1 July 2027

Our 30 June 2027 checklist covers the rest of the family group, and our guide to the 30 June 2027 tax changes shows how this fits with the other reforms. For a hand with the numbers, our capital gains tax advice team does this work every week.

General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.