The case for holistic financial planning.
What is capital gains tax when selling a property?
Capital gains tax (CGT) is tax on a gain when you sell or otherwise dispose of an asset, such as a rental property. The gain is usually sale proceeds less the adjusted cost base, which means eligible costs. Home exemptions, losses, discounts and the legislated July 2027 reforms affect how much is taxable.
Updated
Why is a capital gain different from the cash left after settlement?
The gain uses sale proceeds and the adjusted cost base, rather than just taking the mortgage payout off the sale price. The cost base may include the purchase price, eligible duty, legal work, selling costs and improvements to the property.
You cannot count a cost in the cost base if it was already deductible. Capital works deductions, which relate to building costs, can require a change to the base. Loan debt affects the cash left from a sale. It is not a further cost to deduct from the gain. A capital loss generally reduces capital gains, rather than wages.
Is the home I live in always exempt from capital gains tax?
A main residence, meaning your home, can be exempt if it meets the rules. The legislated reform keeps this exemption. The full exemption depends on who owns the home and how it is used. Just calling a property home does not answer every tax case.
Renting it out or using it for business can affect the result. So can tax residency and times when you nominate another home for the exemption. A home partly used to earn income may only be partly exempt. The ATO's home guidance deals with these cases apart from the normal rental property gain.
What replaces the CGT discount from 1 July 2027?
The 2026 reform is law. It applies to gains that build up from 1 July 2027. For those gains, the cost base is adjusted for inflation, a rise in prices over time. This is called indexation, and replaces the 50% discount. A 30% minimum tax applies to the real gain, meaning the gain above inflation.
Gains built up before that date keep the 50% discount if the owner qualifies. Australian resident individuals generally must have held the asset for at least 12 months to qualify. The discount halves the eligible gain counted for tax. It does not halve an income tax rate. The changeover rules decide how to split gains built up before and after the start date.
Illustrative example4 steps
Finding the gain before applying any exemption or discount
- Assumed sale proceeds: $780,000.
- Purchase price: $620,000, plus $40,000 of eligible net cost-base additions.
- Adjusted cost base: $620,000 plus $40,000 = $660,000.
- Capital gain before further tax rules: $780,000 minus $660,000 = $120,000.
For investors
Purchase and improvement records can matter years after the expense.
A gain depends on more than the prices you buy and sell for. Duty, legal costs, spending on improvements and deductible building costs can change the cost base. The July 2027 change also makes the time a gain built up distinct from the time you sell. Your accountant or registered tax agent can check the required changes to the cost base and the reform's effect on the sale.
Common questions
Questions about CGT
Keep learning
Property is a complex world.
Capital gains tax is one piece of it. Taxes and duties decide what a property really costs to buy and to hold. Next, read about stamp duty, negative gearing and depreciation schedule.
Success stories
Where the numbers shaped the plan.
If you want help
How to choose a buyer's agency.
Four questions to ask any agency, with our answers.
Who pays you?
You do. Never a developer or the selling agent, who works for the vendor.
What is your track record?
Founded in 2018 by Arjun Paliwal, with 3,100+ completed purchases and 850+ five-star Google reviews. REB Buyer's Agency of the Year, winner 2023, 2024 and 2026.
How do you choose a property?
A QPIA-qualified strategist sets the plan. Every shortlisted property passes our 20-point due diligence.
What happens after settlement?
Portfolio reviews, and a Portfolio Wealth Blueprint for what comes next.