Knowledge Hub · Tax Strategy

Capital gains tax on Australian property

The rules, discounts and exemptions that matter most for property investors.

Krishna Avadhani FBAA Accredited Broker

What is capital gains tax?

CGT isn't a separate, standalone tax. When you sell an asset like an investment property for a profit, that profit is a capital gain, which gets added to your taxable income for the year and taxed at your marginal rate.

        The 50% discount: If you buy a property as an individual and hold it for more than 12 months before signing a contract to sell, you generally qualify for the ATO's 50% CGT discount — meaning you're only taxed on half the gain.
    

How the gain is calculated

Your gain isn't simply sale price minus purchase price. The ATO looks at your cost base, which includes:

The original purchase price
Purchase costs (stamp duty, legal fees, building inspections)
Selling costs (agent fees, marketing, auction costs)
Unclaimed capital improvements over the years

Your capital gain is the sale price minus this full cost base.

Key exemptions

Main residence exemption

A property you live in as your principal place of residence is generally exempt from CGT entirely — when you sell your family home, the profit is typically tax-free.

The 6-year rule

If you move out of your home and rent it to tenants, you can often continue treating it as your tax-free main residence for up to six years, provided you don't claim another property as your main residence in that time.

Where your loan structure matters

Keeping personal and investment borrowing clearly separated makes it far easier to track deductible interest and avoid a tangled tax position later. Refinancing to extract equity for a deposit is generally a tax-free event — it doesn't trigger a CGT liability the way selling a property would.

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