What is Loan-to-Value Ratio (LVR)?

LVR (Loan-to-Value Ratio) is the percentage of a property's value that you are borrowing. For example, if you buy a $750,000 property and borrow $600,000, your LVR is 80%. Most Australian lenders require an LVR of 80% or below to avoid Lenders Mortgage Insurance (LMI). The lower your LVR, the more equity you hold from day one.

What LVR do I need to avoid Lenders Mortgage Insurance (LMI)?

Most Australian lenders require an LVR of 80% or lower to avoid Lenders Mortgage Insurance (LMI). At 80% LVR you are contributing at least 20% as a deposit. Lenders can go up to 95% LVR but LMI premiums rise sharply above 80%, adding thousands to your borrowing costs.

How is property equity calculated?

Property equity is the difference between your property's current market value and the outstanding balance of your mortgage. If your property is worth $900,000 and you owe $500,000, your equity is $400,000. Equity grows as your property value rises and as you pay down your loan. An independent property valuation gives you an accurate figure to base equity calculations on.

How much deposit do I need to buy a house in Australia?

To borrow at an 80% LVR (avoiding LMI), you need a 20% deposit plus purchase costs such as stamp duty and legal fees. On a $750,000 property that's $150,000 plus costs. Some buyers can access loans up to 95% LVR requiring only a 5% deposit, but LMI will apply. Use the LVR & Deposit Calculator above to work out your numbers.

What is the CGT 50% discount on investment property in Australia?

Under current Australian tax law, individuals and trusts that hold an asset for more than 12 months receive a 50% discount on their capital gain before it is added to their assessable income. If you make a $300,000 capital gain on an investment property, only $150,000 is taxable. This discount has applied since September 1999.

How does the proposed CGT CPI indexation method work?

Under the proposed CPI indexation reform, instead of a flat 50% discount, your original cost base is adjusted by the increase in the Consumer Price Index (CPI) between your purchase year and sale year. The capital gain is then the difference between the sale price and the CPI-indexed cost base. This removes the inflation component from the gain so you are only taxed on real economic growth. Long-held properties in high-inflation periods typically benefit most.

What is the 6-year absence rule for CGT on property in Australia?

Under ATO Tax Ruling TR 2015/1, if you move out of your main residence and rent it out, you can continue to treat it as your main residence for up to 6 years per absence period. If you sell within that 6-year window the property may be fully exempt from CGT. Any period beyond 6 years is proportionally subject to CGT, calculated over your total ownership period. Only one main residence can be nominated at a time.

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Q: Is the CGT indexation reform currently law in Australia?

The replacement of the 50% CGT discount with CPI indexation was confirmed in the 2026–27 Federal Budget (13 May 2026), with legislation planned to take effect from 1 July 2027. Properties held before Budget night (12 May 2026, 7:30pm AEST) are grandfathered on the 50% discount. New builds purchased after Budget night can choose either method. Established properties purchased after Budget night will use CPI indexation from 2027. A 30% minimum tax applies to all CGT events from 1 July 2027 (income support recipients exempt). This calculator is for indicative purposes only. Always consult a registered tax accountant.

Calculate your borrowing power and LVR — and estimate how the Government's proposed CGT indexation reform may affect your investment property.

LVR & deposit calculator

Max purchase price tool

CGT indexation estimator

CGT reform: proposed, not yet law

Borrowing power & equity

LVR, Deposit & Equity Calculator

Enter any two fields to calculate the third.

Your deposit ($)

How much you can contribute

LVR (%)

Lender's loan-to-value ratio

Property value ($)

Purchase price or valuation

Pair this with a Desktop Valuation or Certified Valuation for an accurate property value before you approach your lender.

LVR & equity explained

What is LVR?

LVR (Loan-to-Value Ratio) is the share of a property's value you are borrowing. A $600,000 loan on a $750,000 property = 80% LVR. Most Australian lenders require 80% LVR or less to avoid LMI premiums.

What is property equity?

Equity = current market value minus your outstanding loan balance. As your property value rises and your loan reduces, equity grows — and can be released for renovations, a new purchase, or investment.

Why lenders need valuations

Lenders calculate LVR against a formal valuation, not just the purchase price. A professional property valuation confirms true market value and protects you from over-borrowing against an inflated figure.

2026–27 Budget confirmed — legislation pending for 1 July 2027
On 13 May 2026 the Government confirmed the replacement of the 50% CGT discount with CPI indexation and a 30% minimum tax on net gains, effective 1 July 2027. Properties held before Budget night (12 May 2026, 7:30pm AEST) are grandfathered on the 50% discount. New builds purchased after Budget night can choose either method. Established properties purchased after Budget night will use CPI indexation from 2027. This calculator is for indicative purposes only. Always consult a registered tax accountant.

Proposed reform

CGT Indexation Estimator

Compare your estimated Capital Gains Tax under the current 50% discount method vs. the proposed CPI indexation method — including the 6-year absence rule.

Capital Gains Tax — 50% Discount vs CPI Indexation

Enter your property details to see which method may produce a lower tax outcome.

1Property classification

Held before 12 May 2026
Grandfathered — 50% CGT discount applies to all gains

New build (after 12 May 2026)
You can choose: 50% discount or CPI indexation

Established property (after 12 May 2026)
CPI indexation applies from 1 July 2027

2Purchase details

Year of purchase

Purchase price ($)

Original cost base

Acquisition costs ($)

Stamp duty, legal fees, etc.

3Sale details

Year of sale

Expected sale price ($)

Your marginal tax rate

Pensioner / income support recipient — exempt from 30% minimum tax

4Main residence & absence rule

Never my main residence (investment property throughout)

Was my main residence, then I moved out

Year you last lived in the property

The year you moved out and stopped using it as your main residence.

6-year absence rule: If you moved out and rented the property, you can treat it as your main residence for up to 6 years per absence period (ATO Tax Ruling TR 2015/1). Years beyond 6 are subject to CGT, pro-rated over your total ownership period.

Your estimated CGT comparison

—

Years owned

—

Exempt years

—

Taxable years

—

CPI adjustment

CURRENT — 50% Discount Method

Total cost base	—
Sale price	—
Raw capital gain	—
50% discount applied	—
Taxable portion (after exemption)	—
Estimated tax payable	—

NEW — CPI Indexation Method

Original cost base	—
CPI-indexed cost base	—
Sale price	—
Capital gain (after indexation)	—
Taxable portion (after exemption)	—
Estimated tax payable	—

Need a CGT-compliant valuation report?

To support your accountant's CGT calculation, you'll need a dated property valuation report. A hovr Desktop Valuation can be prepared at a specific historical date — for example, when you first rented the property, or a change-of-use event.

Order a Dated Valuation

Methodology: CGT reforms confirmed in the 2026–27 Budget are subject to legislation for a 1 July 2027 start date. CPI values are approximate annual averages based on ABS All Groups Consumer Price Index data. The indexation factor is calculated as CPI(sale year) ÷ CPI(purchase year). The 30% minimum tax applies to net gains from 1 July 2027 for all CGT events (income support recipients exempt). The 6-year absence rule is applied per ATO Tax Ruling TR 2015/1. Acquisition costs are included in the cost base for both methods. This calculator does not account for capital improvements, partial-year adjustments, or other CGT cost base elements. Not financial or tax advice.

Understanding CGT on Investment Property in Australia

A guide to the current rules, the proposed reform, and how a professional valuation fits in.

Current method: 50% discount

Introduced in September 1999, the 50% CGT discount applies when you hold an asset for more than 12 months — only half the capital gain is added to assessable income. From 1 July 2027 this method is grandfathered for properties held before Budget night (12 May 2026) and remains available as a choice for new builds. It will not apply to established properties purchased after Budget night when sold from 2027.

New method from 1 July 2027: CPI indexation

Confirmed in the 2026–27 Budget, your original cost base is indexed by the increase in the CPI from purchase year to sale year — removing the inflation component so you are taxed only on real economic growth. A 30% minimum tax applies to net gains from 1 July 2027 (pensioners and income support recipients are exempt). Long-held properties in high-inflation periods generally benefit from indexation; recently purchased properties may still fare better under the 50% discount if they are a new build and eligible to choose.

The 6-year absence rule

If you lived in a property as your main residence then moved out and rented it, you can continue to treat it as your main residence for up to 6 years per absence period (ATO Tax Ruling TR 2015/1). Selling within those 6 years can make the property fully CGT-exempt. Any period beyond 6 years is taxable on a pro-rata basis over total ownership. Only one main residence can be nominated at a time.

Why you need a dated valuation for CGT

Your accountant typically needs a valuation at the change-of-use date — when the property switched from main residence to investment. A hovr Desktop Valuation can be prepared at any historical date, providing the defensible, ATO-acceptable market value figure your accountant needs to complete your CGT schedule accurately.

Tools to help you makebetter property decisions