Updated: April 2026

Selling an investment property in Australia triggers a "Capital Gains Tax (CGT) event." Despite its name, CGT is not a separate tax; your net capital gain is simply added to your taxable income for that financial year and taxed at your marginal rate.

1. How is your Capital Gain calculated?

Your capital gain is the difference between what it cost you to get the property and what you received when you sold it.

• Selling Price: The contract price you sold the property for.
• Cost Base: This is NOT just the purchase price! Your cost base includes the original purchase price plus incidental costs like stamp duty, legal fees, agent commissions, and any major capital improvements (like adding a new roof or an extension).

2. The 50% CGT Discount (The 12-Month Rule)

If you are an Australian resident for tax purposes and you own the investment property as an individual (or through a trust) for more than 12 months, you are eligible for a 50% CGT discount.

This means if your property made a $100,000 profit, you only add $50,000 to your taxable income for the year. Note: Companies are not eligible for this 50% discount.

3. What about the Main Residence Exemption?

Generally, you do not pay CGT on your primary home (your main residence). However, if you originally lived in the property and then rented it out, or if you used part of your home to run a business, you may be liable for a partial CGT amount when you sell.

There is also a "6-year rule" that allows you to treat a property as your main residence for up to 6 years after you move out, provided it is being rented out and you do not claim another property as your main residence during that time.

4. How to minimize your CGT

If you have made capital losses on other investments (like selling shares at a loss), you can use those losses to offset your property capital gain. Additionally, making a tax-deductible contribution to your Superannuation in the year you sell the property can help reduce your overall taxable income.

Planning to sell? A capital gain can push you into a much higher tax bracket. We highly recommend contacting Loyal Bright Accountants before you sign a contract of sale so we can legally minimize your tax liability and plan the best time to sell.