July 2027 deadline: ten months to get the CGT cost base right

Advisers with property investors on the books are about to inherit a question that used to belong to the accountant: should this client hold, sell or restructure before the CGT reforms take effect on 1 July 2027?

Plenty of clients have already answered it without waiting for the advice. Investor borrowing fell 10.2 per cent in the June quarter to $37.1 billion, the steepest quarterly retreat since September 2022, and the two largest investor markets led the way down, with New South Wales off 15.5 per cent and Victoria off 14.2 per cent.

Commonwealth Bank has since reported investor applications running about 28 per cent below their pre-budget level. Interest rates played no part in that.

Parliament has passed the first tranche of the government’s negative gearing and capital gains tax reforms. While the changes only take effect on 1 July 2027, investors have spent the winter rearranging their affairs in advance.

Behaviour has moved ahead of the legislation, which is what happens every time Australia touches the tax treatment of property.

Viridian Financial Group has moved on the same shift. The group launched Viridian Lending on 18 August, bringing its mortgage broking business under one national brand. The launch completes the integration of its former Smartmove business, which settles more than $1 billion in lending each year.

Cameron Wiles has taken the role of general manager, lending. He runs that team inside a group that counts 27 brokers alongside more than 100 advisers, and oversees $7 billion in funds under advice and $3.6 billion in lending.

The new name matters less than the date it arrived. Viridian chose to fold its brokers into the same house as its advisers less than a year before the rules governing every geared property investment change. This is not a coincidence; it’s a calculated bet on where the client conversation goes next.

What the CGT reforms change on 1 July 2027

The reforms rebuild two settings advisers have worked around for decades.

The negative gearing change lands first, and one timestamp decides who it touches. Investors who owned residential property before 7.30pm on 12 May 2026 keep full deductibility of net rental losses against other income, indefinitely.

Anyone who bought an established dwelling after that announcement can negatively gear it until 30 June 2027 and no further.

From 1 July 2027, losses on established dwellings offset income from residential property only, with excess losses carried forward. New builds keep full access, provided the project adds dwellings to supply.

The capital gains change reaches further, swapping one discount for two moving parts. Cost base indexation using CPI replaces the 50 per cent discount, in the manner that applied between 1985 and 1999, and a minimum tax rate of 30 per cent then applies to real gains accruing from 1 July 2027.

Gains that accrued before that date keep the old discount. So every affected asset needs a value at 1 July 2027, set either by a professional valuation or by an ATO apportionment formula.

The scope is broader than the property coverage suggests. Indexation and the minimum rate apply to all CGT assets held for at least 12 months by individuals, partnerships and trusts. That pulls share portfolios into the same exercise as investment properties.

Clients on means-tested income support escape the minimum rate where they receive a payment in the year they realise the gain.

Where the broker meets the client first

Brokers wrote 81 per cent of new residential home loans in the March 2026 quarter, an MFAA record and a long climb from 55.3 per cent eight years earlier. For most households, the broker hears the property plan before the adviser does.

From 1 July 2027, whoever speaks to the client first is answering two questions at once. Weighing an established rental against a new build now involves a financing decision and a tax decision in the same breath, and the two answers move together.

Quarantined rental losses change after-tax cash flow. Cash flow changes what a lender will approve. Serviceability then shapes which entity should hold the asset, and the timing of any sale shapes the tax on the way out.

Raamy Shahien, chief executive of Viridian Financial Group, treats the two decisions as one conversation.

“Financial decisions are becoming more complex and more interconnected,” Shahien says. “Lending is no longer just about securing finance. It’s increasingly one part of a broader financial picture.”

Independence with a back office

Viridian Lending leaves brokers holding their own client relationships while the group supplies technology, referral flow, marketing and operational support.

A structured professional development programme and an international administration team back the model. Viridian Lending won the 2026 MFAA Professional Development Award, and global growth investor TA Associates backs the group.

Wiles says the business was built around where the broking profession is heading, and he puts technology at the centre of that.

“Technology is changing what brokers should spend their time doing.”

“As AI continues to evolve, we see significant opportunities to reduce administration and free brokers to focus on the judgement, relationships and complex conversations that clients value most,” Wiles says.

The reforms will test that ambition. From July 2027, every disposal conversation needs a cost base history, a valuation at the switchover date and a view on whether indexation beats the grandfathered discount. Paperwork per client rises before automation gets the chance to bring it down.

Where the model could strain

The demand this creates is smaller than it first looks, and grandfathering explains why. Investors who bought before 12 May 2026 keep their deductions indefinitely. A large share of the existing advised book therefore needs no restructuring at all.

The reforms create work at the margin, among clients buying next or selling soon, rather than across every property client on the file.

The credit pool is also shrinking while the model scales up. Investor lending fell in every major eastern state last quarter. A broking business weighted towards investors therefore faces a smaller market than one weighted towards owner-occupiers. That gap narrows only as the new build concessions feed through into stock.

Integration carries its own history too. Advice groups have combined lending and advice before. The Hayne royal commission examined referral arrangements where the referral, rather than the client’s need, decided the outcome.

Standard 3 of the Financial Planners and Advisers Code of Ethics is direct on conflicts. It bars advisers from advising, referring or acting where they hold a conflict of interest or duty.

Any in-house arrangement therefore lives or dies on documented process, whoever owns the two businesses. Closer collaboration still stands up, provided advisers ask a related broker the same questions they would ask an unrelated one.

Ten months to get in the room

Every advised client holding an investment property or a share portfolio now owns a date they cannot renegotiate.

Whatever value their cost base takes on 1 July 2027 follows them to the eventual sale, whether that comes in 2029 or 2049.

Getting that number right, along with the ownership structure around it, is work for the ten months before the CGT reforms take effect rather than the years after it. The broker, for most of those clients, is already in the conversation.