CGT on Investment Property Australia
How CGT works on Australian investment property including the 50% discount, exemptions, calculation method, and strategies to legally minimise your tax.
When you sell an investment property in Australia for more than you paid, the profit is a capital gain and is subject to Capital Gains Tax (CGT). Understanding how CGT is calculated and what exemptions apply can save you tens of thousands of dollars. This guide covers the rules as they stand in the 2025-26 financial year.
How CGT on Property Works
Australia does not have a separate capital gains tax. Instead, your net capital gain is added to your assessable income and taxed at your marginal tax rate. For individuals, the top marginal rate is 45% plus the 2% Medicare levy, making the effective top rate 47%.
The Basic Calculation
- Capital gain = Sale price minus cost base
- Cost base = Purchase price + stamp duty + legal fees + capital improvements + holding costs (if acquired after 20 August 1991)
- Net capital gain = Capital gain minus any capital losses minus the CGT discount (if applicable)
The 50% CGT Discount
If you hold the property for more than 12 months and you are an individual (not a company), you receive a 50% discount on your capital gain. This is the single most powerful CGT concession available.
Example: You buy a property for $500,000 and sell it five years later for $750,000. Your cost base (including stamp duty and improvements) is $540,000. The gross capital gain is $210,000. After the 50% discount, only $105,000 is added to your taxable income.
What Is Included in the Cost Base
| Item | Included? |
|---|---|
| Purchase price | Yes |
| Stamp duty on purchase | Yes |
| Legal and conveyancing fees | Yes |
| Capital improvements (new kitchen, extension) | Yes |
| Agent commission on sale | Yes (reduces capital gain) |
| Advertising costs for sale | Yes |
| Interest on loan | No (claimed as annual deduction instead) |
| Repairs and maintenance | No (claimed as annual deduction) |
| Depreciation previously claimed | Reduces cost base |
The Main Residence Exemption
Your main residence (the home you live in) is generally fully exempt from CGT. However, if you rented out part of your home or used it to produce income, a partial CGT liability may arise. The "6-year absence rule" allows you to treat a former main residence as your primary home for up to 6 years while it is rented out, provided you do not claim another property as your main residence during that time.
Strategies to Minimise CGT
- Hold for more than 12 months to qualify for the 50% discount.
- Time your sale — sell in a financial year when your other income is lower to take advantage of a lower marginal rate.
- Offset with capital losses — losses from shares or other investments can offset property gains.
- Keep records of all capital improvements — renovations increase your cost base and reduce your gain.
- Consider ownership structure — trusts can distribute gains to beneficiaries in lower tax brackets.
- Use the 6-year absence rule if you move out of your home and rent it.
CGT for Foreign Residents
Since 2020, foreign and temporary tax residents are no longer eligible for the 50% CGT discount on property. They also face a 12.5% withholding on property sales over $750,000, collected by the ATO at settlement. This makes it essential for non-residents to plan property sales carefully.
Calculate your exact CGT liability with our Australian CGT Calculator.