Every year, I tend to be engaged as a members’ voluntary liquidator over one or two companies for a very specific purpose: winding them up in order to facilitate a tax-free distribution resulting from the sale of pre-capital gains tax property or shares.
What is interesting is how common that scenario is in practice, and yet how little data there is on it. There is no reliable public data showing how much property is still held in company structures as pre‑CGT assets. Despite that, from a practitioner’s perspective, it is clear these assets are not rare; they sit quietly inside long‑standing family groups and are held for decades.
This little‑discussed change in the Federal Budget appears to be aimed directly at that cohort. As a side effect, it may be a deliberate attempt to unwind long‑term land banking behaviour and encourage the release of land that has been tightly held for generations.
Capital assets acquired before September 1985 have always occupied a unique position in Australia. They effectively carried a permanent exemption from capital gains tax. Any increase in value over time could be realised tax‑free, which created a powerful disincentive to sell. Even where other investments may have offered stronger economic returns, those returns were taxed, whereas property and other capital assets held pre‑CGT could continue to grow without any tax leakage.
The 2026 Federal Budget seeks to materially change that position. From 1 July 2027, pre‑CGT assets will no longer retain that ongoing exemption. While gains accrued up to that date will be preserved, any further growth will be brought into the tax system based on a reset valuation at that point.
Once future gains are no longer tax-free, it is inevitable that members will begin to reassess whether these assets should continue to be held. The Budget effectively removes an incentive to sit on property for the long-term.
By abolishing tax-free growth, other investments may look comparatively more attractive. In my opinion, we are entering an environment where tax concessions for property investors are being unwound.
Property is facing broader headwinds
Importantly, this change does not occur in isolation.
The proposed tax reforms introduce additional pressure on property as an investment class:
The introduction of a 30% minimum tax on capital gains
The removal of the 50% CGT discount (replaced by indexation)
Taken together, these factors point in one direction: reducing demand from investors for existing housing and encouraging supply through:
Removing the pre-CGT tax exemption
Allowing negative gearing on new builds.
Economics 101 says that price is determined by the intersection of supply and demand.
Reduction to Demand | Increasing Supply |
Remove negative gearing on existing property | Encourage release of long-term land holdings by removing CGT exemption |
Discourage “flipping” via removal of CGT discount | Encourage building new homes via negative gearing tax policy |
Discourage short-term speculation by removal of CGT discount |
|
Introduction of 30% minimum tax on capital gains |
|
In addition to a fiscal policy clearly aimed at reducing demand and increasing supply, the market is also operating within a contractionary monetary environment. Inflation remains elevated, with the consumer price index at 4.6% annually to March 2026, and expectations are that interest rates may need to remain higher for longer or rise further.
As a result, both fiscal and monetary policy settings are geared towards depressing the property market.
The importance of timing
Most advisors are keeping a level head regarding 1 July 2027. I doubt we’re going to see a rush to sell all pre-CGT assets before 30 June 2027.
If a pre-CGT asset is sold before that date, the historical position is preserved, and the capital growth remains exempt. If it is sold after that date, only the future growth will be taxed.
What happens when the asset is sold
For companies holding these assets, selling the property is only part of the equation.
The proceeds will then sit within the company.
At that point, the focus shifts to how those funds are returned to members.
A standard dividend distribution may:
Trigger additional tax
Reduce the overall benefit of the sale
The role of a Members’ Voluntary Liquidation (MVL)
In most cases, the only effective mechanism to distribute capital proceeds to shareholders is through a Members’ Voluntary Liquidation (MVL).
An MVL allows:
The company to be wound up
Capital to be returned to shareholders
Distributions to be characterised as capital rather than income
From a practical perspective, any strategy involving the sale of pre‑CGT assets held in a company must consider:
Whether an MVL is required
How and when that process is implemented
While I don’t expect there will be a rush to exit in terms of the sale of pre-CGT assets, with the loss of their exemption, there is less incentive to continue holding long-term. As a result, I expect over the next few years we may see a final surge of the “pre-CGT” MVL distribution, followed by them becoming ever increasingly rare.
