Sarah and James - $1.5M NSW investment property under 2027 reform
Published 2026-05-31 · Updated 2026-05-31
The result. Under current law, holding this $1.5M Sydney rental jointly for 10 years leaves the couple with $739,053 in final after-tax equity. Under the proposed 2027 reform, the same hold leaves them with $682,281 - a $56,772 reduction. Below: who they are, the exact inputs we modelled, why the reform costs them money, and the structure comparison that helped them decide.
Who they are (anonymised)
- Sarah - medical specialist in Sydney, $200k taxable income before the investment, private hospital cover (so no MLS).
- James - schoolteacher, $80k taxable income. Covered as a dependant on Sarah's PHI policy.
- The property - established residential in an inner-Sydney suburb, purchased for $1.5M (contract Jul 2025, settlement Sep 2025), expected to grow at 5% per year.
- The loan - $1.2M at 6.5% interest, principal + interest, 30-year term.
- The rent - $58,500/year (gross), expenses $14,000/year (rates, insurance, maintenance, agent), 4% vacancy allowance.
- Ownership - joint personal, 50/50 split.
- Plan - hold for 10 years, sell.
The result - current law vs 2027 reform
Every figure below comes from the Byrz calculation engine. You can reproduce this scenario in the sample report.
| Metric | Current law | 2027 reform | Delta |
|---|---|---|---|
| Final after-tax equity (Yr 10) | $739,053 | $682,281 | −$56,772 |
| CGT payable at sale | $96,602 | $77,973 | −$18,629 |
| Cashflow position (10y total) | −$190,000 | −$206,265 | −$16,265 |
Why the reform costs them money
CGT is actually lower under reform here ($77,973 vs $96,602). The win comes from the CPI-indexed cost base - over 5 years of holding after 1 July 2027, the cost base of the post-2027 portion compounds at the assumed CPI rate (2.5% here), shielding around $18.6k of nominal gain from tax.
The loss comes from negative-gearing restriction. Sarah and James run a $20-25k pre-tax property loss per year on this rental. Under current law, those losses offset their salary income directly - the tax refund cushions the cashflow burden. Under reform, the established-residential negative gearing restriction kicks in (s 26-105 proposed): the losses can no longer offset salary, only future property income. With no other property income to absorb them, the losses sit as carried-forward, draining cashflow by an extra $16,265 over the hold.
Net: the reform's CGT improvement ($18.6k) doesn't fully compensate for the cashflow drag ($16.3k) plus the structural "you can't use losses anymore" effect on equity build-up, leaving them $56,772 worse off after 10 years.
Structure comparison - what if they restructured?
We ran the same property through all six structures the engine models. The 2027-reform column is what matters for the forward-looking decision.
| Structure | Final equity (reform) | vs joint personal |
|---|---|---|
| Joint personal (current) | $682,281 | - |
| Personal (Sarah only) | $670,878 | −$11,403 |
| Discretionary trust | (lower - trust min-tax floor) | - |
| Company | Much lower - no CGT discount | - |
| SMSF (accumulation) | Higher per-dollar return; 15% tax, 10% effective on long-term CGT | - |
Detailed structure breakdowns including the loss/gain mechanism for each are in the full sample report.
The restructure-cost gate
Moving this property from joint personal to anything else costs real money - the engine models that, too. NSW stamp duty on transferring James's 50% to Sarah-only would be ~$36k. Stamp duty on transferring to a discretionary trust would trigger CGT for both Sarah and James (~$48k between them, after their 50% discount). Moving to a company triggers CGT plus loses the discount going forward.
For a 10-year hold with $56,772 of reform exposure, none of those one-time costs pay back within the planning horizon. The decision: stay in joint personal, ride out the reform, and revisit before any larger structural change.
What you can take from this
- The 2027 reform is not uniform. Some positions benefit from indexation; some lose more from the negative-gearing restriction than they gain from indexation. The mix depends on your loan size, marginal rate, and hold period.
- Negative gearing matters more than people think. For high-LVR established residential, the cashflow drag from losing the salary offset is often larger than the CGT change.
- Restructuring carries a real cost. Stamp duty + CGT on the move is often $40-80k for a property in this range. For most situations, the reform exposure has to be in the $80k+ range before a restructure pays back inside 10 years.