Capital gains tax (CGT) on property in Australia is not a separate tax with its own bill. When you sell an investment property for more than it cost you, that profit, the capital gain, is added to your taxable income for the year and taxed at your marginal rate.
That single sentence does a lot of work, so let us unpack it. The good news for most people is that the home you actually live in is generally left alone. The catch is that almost everything else, the rental, the holiday flat, the block you bought to flip, is fair game. Here is how it all fits together, with the figures last checked June 2026.
CGT is just income tax wearing a different hat
There is no separate CGT rate in Australia. Instead, your net capital gain for the financial year gets bolted onto the rest of your income, and the whole lot is taxed according to where you land on the marginal tax brackets.
The practical effect is that the same sale can cost two people very different amounts. Someone on a modest income in a year when they sold might pay tax on the gain at a fairly low rate. A high earner selling the identical property in a big income year could see a large slice taxed at the top marginal rate, which sits around 45 per cent plus the Medicare levy as last checked June 2026. The asset is the same. The tax is not.
A capital gain is triggered by what the law calls a CGT event, and for property the usual trigger is the sale, specifically the date you sign the contract rather than the day settlement lands in your account. That timing detail matters more than people expect, because it can pull a gain into one financial year or push it into the next.
The cost base: the number that decides everything
Your gain is not simply the sale price minus what you paid. It is the sale price minus your cost base, and the cost base is broader than the purchase figure alone.
The cost base generally includes:
- The purchase price of the property.
- Buying costs such as stamp duty, conveyancing, and legal fees.
- Selling costs such as agent commission and marketing.
- Capital improvements, the new kitchen, the extension, the carport, as opposed to routine repairs.
Everything you can legitimately add to the cost base shrinks the gain, and a smaller gain means less tax. This is why the least glamorous habit in property investing, keeping every receipt and invoice from the day you buy to the day you sell, quietly does some of the heaviest lifting on your eventual bill.
Repairs keep a property working. Improvements change what it is. Only one of them usually goes into your cost base.
The 50% discount for holding longer than a year
Here is the lever most investors care about. If you are an individual and you have held the asset for more than 12 months before the CGT event, you generally qualify for the 50 per cent CGT discount. In plain terms, only half of your capital gain is added to your taxable income. The other half is, for tax purposes, ignored.
The 12 month clock generally runs from the date of acquisition to the date of the next CGT event, and the more than 12 months part is doing real work, so a property held for exactly a year, or sold a week shy, can miss out entirely.
A worked example makes the saving obvious. The figures below are illustrative, rounded, and meant to show the mechanism, not your actual outcome.
| Step | Amount (illustrative) |
|---|---|
| Sale price | $750,000 |
| Cost base (purchase, stamp duty, buying and selling costs, improvements) | $600,000 |
| Gross capital gain | $150,000 |
| Less 50% discount (held more than 12 months) | $75,000 |
| Taxable capital gain added to income | $75,000 |
So a $150,000 gross gain becomes $75,000 of taxable gain once the discount applies. That $75,000 is then taxed at your marginal rate, whatever that happens to be in the year you sell. Hold the same property for under 12 months and the full $150,000 would be in play instead. The discount is, for many investors, the single biggest reason to be patient. If you are still weighing whether to buy at all, our guide to buying an investment property walks through the earlier steps.
The main residence exemption
Now the part that reassures most homeowners. The home you actually live in, your main residence, is generally exempt from CGT under the main residence exemption. Sell the place you genuinely call home and, in the typical case, there is no capital gains tax to pay.
Generally is carrying weight there, because the exemption comes with conditions:
- Land size. The exemption generally covers the dwelling and up to two hectares of surrounding land. Larger holdings can fall partly outside it.
- Using the home to produce income. If you run a business from home or rent out a room, part of the exemption can be reduced for the period and proportion used to earn income.
- The six year rule. If you move out and rent the property, you may be able to continue treating it as your main residence for up to six years for CGT purposes, provided you are not claiming another property as your main residence at the same time. Move back in, and in some cases the clock can reset.
The line between an exempt home and a taxable investment is not always clean, especially for people who have lived in a place, moved out, rented it, and later sold. This is precisely the territory where general rules stop being enough and individual advice earns its keep.
How to manage CGT on property
You cannot wish CGT away, but you can be deliberate about it. A few broad, legitimate approaches come up again and again.
Hold for more than 12 months
The simplest move is also the most powerful: where it suits your plans, holding an asset beyond the 12 month mark generally unlocks the 50 per cent discount and halves the gain that gets taxed. Selling just before that anniversary can be an expensive way to save a fortnight.
Keep thorough records
Every cost base item you can document, stamp duty, conveyancing, agent fees, capital improvements, reduces the gain. Sloppy records do not just risk an audit, they quietly inflate your taxable gain because you cannot prove the deductions you were entitled to.
Think about timing and your income year
Because the gain is taxed at your marginal rate, the income you earn in the year you sell shapes the bill. Selling in a year when your other income is lower, a sabbatical, a gap between roles, retirement, can mean the gain is taxed more gently. None of this is a guarantee, and it should never wag the dog of a sound investment decision, but timing is a genuine variable.
If your numbers lean heavily on the rent covering the loan, it is worth refreshing how negative gearing works alongside your exit plan, since the two interact. And when you are ready to stress test an actual sale, modelling it through a tool such as Your Property Guide can help you see the after tax figure before you commit.
A quick, important caveat: this is general information, not personal tax advice, and CGT on property has more moving parts than any single article can cover. Before you act on a specific sale, speak to a registered tax agent who can look at your full circumstances.
The bottom line
Capital gains tax on property in Australia comes down to a few durable ideas. There is no separate CGT rate; your gain is added to your income and taxed at your marginal rate. Your gain is sale price minus the cost base, so every documented buying cost, selling cost, and capital improvement matters. Hold for more than 12 months as an individual and the 50 per cent discount generally halves the taxable gain. The home you actually live in is generally exempt, subject to conditions like land size and the six year rule.
Get the cost base right, be patient past the 12 month mark, keep your records tidy, and you have done most of the heavy lifting yourself. For the rest, the bits that hinge on your particular situation, a registered tax agent is the person to call. Figures here were last checked June 2026 and can change.