Capital Gains Tax on Property Australia 2026

Capital gains tax (CGT) applies when you sell an investment property for more than you paid for it. The capital gain is the difference between the sale price (less selling costs such as agent commissions and legal fees) and the cost base (the buy price plus buying costs such as stamp duty, legal fees, and the cost of any capital improvements).

Heads up — This net capital gain is added to your taxable income in the financial year you sign the contract of sale, and you pay tax on it at your marginal tax rate. For example, if you purchased an investment property for $500,000 (with $25,000 in buying costs) and sell it for $750,000 (with $20,000 in selling costs), your capital gain is $750,000 minus $20,000 minus $525,000, equalling $205,000. If you held the property for more than 12 months, the 50% CGT discount reduces this to $102,500. Use our CGT calculator for property to estimate your exact liability.

Australian resident individuals who hold an asset for at least 12 months before selling are entitled to a 50% discount on the capital gain. This is one of the most generous CGT concessions in the world and significantly reduces the effective tax rate on property investments.

Using the example above, a $205,000 gross capital gain becomes $102,500 after the discount. If your marginal tax rate is 37% (plus 2% Medicare levy), the tax on the discounted gain is approximately $39,975. Without the discount, the tax would be approximately $79,950 — so the 50% discount saves nearly $40,000.

The discount is available to individuals and trusts but not to companies, which is one reason most property investors hold assets in their personal name or a family trust rather than a company structure. Self-managed super funds receive a 33.33% CGT discount instead. To see how CGT interacts with your total tax position, try our income tax calculator.

Your principal place of residence is fully exempt from CGT under the main residence exemption. This means if you sell the home you've been living in, you pay no capital gains tax regardless of how much profit you make.

This bit matters. To qualify, the property must have been your main residence for the entire period you owned it, you must not have used it to produce income (such as renting out a room), and you must not have claimed any portion as a home office in your tax returns. If the property was your main residence for only part of the ownership period — for example, you lived in it for five years and then rented it out for three years — the exemption applies proportionally. The ATO also applies a dwelling-to-land ratio if the land exceeds two hectares.

The six-year absence rule (also called the temporary absence rule) allows you to continue treating a property as your main residence for CGT purposes for up to six years after you move out, provided you don't treat another property as your main residence during that period. This is particularly useful if you move interstate or overseas for work and rent out your home while you're away.

If you return within six years, the full main residence exemption applies and you pay zero CGT. If you're away for longer than six years, a partial exemption applies based on the proportion of time the property was your main residence. The six-year period resets each time you move back in, even briefly.

This rule provides significant flexibility for homeowners who need to relocate temporarily and want to protect their CGT-free status.

The cost base of your property includes more than just the buy price. You can add the following to your cost base, reducing your capital gain when you sell: stamp duty paid at buy, legal and conveyancing fees (both buying and selling), building and pest inspection costs, capital improvements made during ownership (such as renovations, extensions, or structural repairs — but not general maintenance), real estate agent commission on sale, and any other costs directly related to acquiring, holding, or disposing of the property.

Don't skip this part. Keeping detailed records of all these expenses is essential, as they can significantly reduce your taxable gain. A $50,000 kitchen renovation added to the cost base, for example, reduces the capital gain by $50,000 and saves approximately $9,750 in tax at the 39% combined rate after the 50% discount. If you're also claiming negative gearing deductions, keeping good records is even more critical. That's the key takeaway.

When you sell an investment property, your conveyancer or solicitor will provide the settlement details, and you report the capital gain in your tax return for the financial year in which the contract of sale was signed (not the settlement date). You complete the capital gains schedule, declaring the sale price, cost base, and any applicable discount.

The ATO receives data from state land title offices, so they're aware when properties change hands. Use our CGT Calculator for Property to estimate your capital gains tax liability before you sell, which can help with planning — for example, you might choose to sell in a year when your other income is lower to reduce the marginal tax rate applied to the gain. If you're considering whether to keep or sell, check your property's performance with our rental yield calculator. For a broader view of how property fits into your wealth, see our guide on net worth by age in Australia. Consulting a tax accountant before selling an investment property is strongly recommended.