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Category: Capital Gains Tax

  • Capital Gains Tax on Property in Australia: The Complete 2026-27 Guide

    Capital Gains Tax on Property in Australia: The Complete 2026-27 Guide

    Capital Gains Tax on Property in Australia: The Complete 2026-27 Guide

    If you’re selling a property this financial year, capital gains tax is probably the biggest single cost you’ll face — bigger than agent commissions, bigger than stamp duty was when you bought. And yet most sellers only think about it after they’ve signed the contract, when most of the planning opportunities have already evaporated.

    Here’s the thing most people get wrong from the start: CGT isn’t a separate tax with its own rate. There’s no “CGT rate” in Australia. Your capital gain gets added to your taxable income for the year and taxed at your marginal rate, just like your salary. That one misunderstanding is behind half the nasty surprises at tax time.

    This guide walks through exactly how capital gains tax on property works in Australia for 2026-27 — the calculation, the 50% discount, the main residence exemption, the 6-year rule — with real numbers at every step.

    Quick answer: You pay CGT on an Australian property when you sell (or otherwise dispose of) it for more than your cost base. Your cost base is the purchase price plus buying costs, selling costs and capital improvements. If you owned it for more than 12 months as an individual, you generally halve the gain with the 50% CGT discount, then add the remainder to your taxable income. Your own home is usually fully exempt. The tax is triggered on the contract date, not settlement.

    How CGT on property actually works

    A “CGT event” — the thing that triggers the tax — usually happens on the day you sign the contract of sale, not the day settlement occurs. This trips people up every June. Sign a contract on 28 June 2027 and the gain belongs to 2026-27, even if settlement happens in September. If you were planning to push the gain into next year, that plan just failed.

    The basic formula is straightforward:

    Capital gain = Sale price − Cost base

    Your cost base isn’t just what you paid for the property. It includes:

    Cost base element Examples
    Purchase price Contract price
    Buying costs Stamp duty, legal fees, buyer’s agent fees, building/pest inspections
    Ownership costs (if not claimed as deductions) Interest, rates, insurance — but only if you haven’t already claimed them
    Capital improvements Renovations, extensions, new kitchen — not repairs
    Selling costs Agent commission, legal fees, advertising, staging

    [SCREENSHOT NEEDED: CGT calculator — property example, $850,000 sale price with cost base breakdown]

    What surprises a lot of sellers: you can’t add repair and maintenance costs to the cost base if you already claimed them as tax deductions while renting the property out. It’s one or the other. But a genuine improvement — a new deck, a renovated bathroom — goes straight onto the cost base and shrinks your gain dollar for dollar. Keep every receipt. The ATO expects you to substantiate each element, and “poor records” is one of the most common reasons property investors overpay.

    The 50% discount and the 12-month rule

    Here’s the concession that does the heaviest lifting for Australian property investors. If you’re an individual (or investing through a trust) and you’ve owned the asset for more than 12 months, you get to halve your capital gain before it touches your tax return.

    The 12 months are measured from contract to contract, and you exclude both the purchase date and the sale date from the count. Sell on day 364 and you get nothing; sell on day 366 and you halve your taxable gain. When a sale is close to the line, check the exact contract dates before you sign anything — a few days’ impatience can cost tens of thousands.

    Who gets what:

    Owner type Discount
    Individual (Australian resident) 50%
    Trust 50%
    Complying super fund 33.33%
    Company None — companies pay full CGT at the company tax rate
    Foreign/temporary resident Generally no discount on gains accrued after 8 May 2012

    One more wrinkle worth knowing: investors who provide affordable rental housing to eligible tenants may qualify for an additional discount of up to 10%, taking the total discount to 60%. It’s a narrow category with strict eligibility rules, so don’t assume it applies — but if you rent below market to eligible tenants, it’s worth asking your accountant about.

    The main residence exemption: when you pay nothing

    Your own home is usually completely exempt from CGT. But “usually” is doing a lot of work in that sentence. All three of these conditions have to hold for the whole time you owned it:

    1. It was your main residence for the entire ownership period
    2. You never used it to produce income (no renting it out, no home business claiming part of it)
    3. The land is 2 hectares or less

    Miss any one of them and you’re into partial-exemption territory. The classic traps: renting out a spare room on Airbnb for a year, running a business from a home office and claiming occupancy expenses, or buying a house on a big rural block. None of these automatically destroy the exemption, but they shrink it — and the calculation gets fiddly fast.

    Properties bought before 20 September 1985 are generally exempt from CGT entirely, regardless of all this. If you’re dealing with a very old family property, check the acquisition date before you do anything else.

    The 6-year rule: move out, keep the exemption

    This is the rule that saves more sellers than any other, and the one most people have only half-heard. If you move out of your main residence, you can continue treating it as your main residence for CGT purposes for up to six years — even while it’s rented out and earning you income.

    The conditions that matter:

    • It was genuinely your main residence before you moved out
    • You don’t treat any other property as your main residence during the same period (one main residence at a time)
    • You sell within the six years — or move back in, which resets the clock

    A real scenario. Daniel bought an apartment in Brisbane for $520,000 in 2019 and lived in it for two years. In 2021 work took him to Melbourne, so he rented the Brisbane apartment out. In 2025 — four years later — he sold it for $780,000. Because he never nominated another main residence and sold within six years of moving out, the entire $260,000 gain was exempt. Zero CGT.

    Where people come unstuck: buying another home and living in it while the old one is rented. You can’t have two main residences. The moment you nominate the new place, the 6-year clock on the old one stops being available for the overlapping period.

    Partial exemptions: when it’s not all-or-nothing

    Life is rarely clean enough for a full exemption. Maybe you rented the place out for three years before moving in, or you ran a business from one room. The ATO’s formula for the taxable slice is:

    Taxable gain = Total capital gain × (days not your main residence ÷ total days owned)

    Days are counted on contract dates, not settlement dates. Then, if you held the property for more than 12 months, the 50% discount applies to the taxable portion.

    Worked example. Priya bought a unit for $600,000 in July 2016 and rented it out immediately. In July 2019 she moved in and lived there until selling for $850,000 in July 2026.

    • Total gain: $850,000 − $600,000 = $250,000 (ignoring costs for simplicity)
    • Days owned: ~3,650. Days rented out: ~1,095
    • Taxable portion: $250,000 × (1,095 ÷ 3,650) = $75,000
    • 50% discount (held > 12 months): $75,000 × 50% = $37,500 added to her taxable income

    [SCREENSHOT NEEDED: CGT calculator — partial exemption example, $850k sale with 3 of 10 years rented]

    Full worked example: investment property sale

    Let’s put it all together with realistic numbers. Michael bought an investment property in March 2019 and sells in September 2026 — comfortably over 12 months.

    Item Amount
    Sale price $850,000
    Purchase price $620,000
    Buying costs (stamp duty, legals) $25,000
    Capital improvements (new kitchen, 2022) $25,000
    Selling costs (agent, legals) $19,000
    Cost base $689,000
    Gross capital gain $161,000
    50% CGT discount −$80,500
    Net capital gain added to income $80,500

    If Michael’s marginal tax rate is 37% (2026-27 bracket for $135,001–$190,000), the CGT bill is roughly $80,500 × 37% = $29,785, plus the 2% Medicare levy on the gain (~$1,610), for a total of about $31,395.

    Notice what mattered most: the $69,000 of costs added to the cost base saved him roughly $12,700 in tax at that rate. Every receipt you kept is money.

    Try your own numbers in our free CGT calculator — it handles the discount, cost base and marginal rates for 2026-27 automatically. And if you’re buying rather than selling, our stamp duty calculator will tell you what the purchase will cost you upfront.

    Mistakes that cost sellers thousands

    Forgetting the contract-date rule. Planning a July sale for next year’s tax return, then signing in June. The ATO taxes the year you sign.

    Selling just short of 12 months. The discount is binary. Eleven months and three weeks gets you exactly the same as eleven days: nothing.

    Not keeping improvement receipts. That $40,000 renovation with no paperwork is $40,000 of cost base you can’t prove — worth up to $18,000 in extra tax at the top marginal rate.

    Assuming the main residence exemption is automatic. Rent it out, run a business from it, or hold more than 2 hectares, and you need to do the partial-exemption maths.

    Gifting property to family. The ATO treats most gifts and transfers as happening at market value, even if no money changes hands. You can trigger CGT without receiving a cent.

    Frequently asked questions

    Do I pay CGT if I sell my own home?
    Usually no — if it was your main residence the whole time, wasn’t used to earn income, and sits on 2 hectares or less, the gain is fully exempt. If any of those fail, a partial exemption may apply.

    How long do I need to own a property to get the 50% CGT discount?
    More than 12 months, measured from the contract purchase date to the contract sale date (excluding both dates). Individuals and trusts qualify; companies don’t.

    Is CGT calculated on settlement date or contract date?
    Contract date. Sign in June, and the gain counts in that financial year even if you settle in September.

    Can I still claim the main residence exemption if I rented my home out?
    Yes, for up to six years after moving out under the 6-year rule — provided you don’t claim another main residence in the same period.

    Do I pay CGT on an inherited property?
    It depends. Inherited dwellings can be fully exempt if sold within two years of the deceased’s death in the right circumstances. Renting it out or waiting longer can trigger CGT — get advice before you decide.

    What records do I need to keep?
    Everything: purchase contract, stamp duty and legal invoices, loan statements, improvement receipts, rental statements, depreciation schedules, and the sale contract. Keep them for at least five years after the sale.

    The bottom line

    Capital gains tax on property rewards the organised and punishes the hurried. Know your cost base, watch your dates, and run the numbers before you sign anything — not after. For 2026-27, the 50% discount and the main residence exemption remain the two concessions that matter most, and the difference between using them well and missing them is often tens of thousands of dollars.

    Run your sale through our free CGT calculator to see your own liability in under a minute, or browse all our tax tools if you’re juggling a sale alongside income tax or stamp duty planning.

  • The 50% CGT Discount Explained: Australia’s 12-Month Rule in 2026-27

    The 50% CGT Discount Explained: Australia’s 12-Month Rule in 2026-27

    The 50% CGT Discount Explained: Australia’s 12-Month Rule in 2026-27

    Of all the tax concessions available to everyday Australian investors, the 50% CGT discount is the most valuable — and the most misunderstood. It doesn’t reduce your tax rate. It doesn’t work like a deduction. It literally cuts your capital gain in half before a single dollar of tax is calculated.

    On a $200,000 gain, that’s the difference between adding $200,000 to your taxable income and adding $100,000. At the top marginal rate, the discount alone is worth around $45,000. Yet every year, sellers lose it through entirely avoidable mistakes: selling a few days too early, holding through a company, or misunderstanding which date the 12-month clock actually runs from.

    This guide covers exactly how the CGT discount works in 2026-27, who qualifies, how the 12 months are counted, and the traps to avoid.

    Quick answer: If you’re an Australian resident individual (or a trust) and you’ve held a CGT asset for more than 12 months, you can reduce your capital gain by 50% before adding it to your taxable income. The 12 months run from the contract purchase date to the contract sale date, excluding both dates. Companies get no discount; complying super funds get 33.33%.

    What the discount actually does

    The mechanics are simpler than most tax law. Take your gross capital gain, subtract any capital losses, then — if you qualify — halve what’s left. That halved amount is your net capital gain, and it goes into your tax return as part of your assessable income for the year.

    Gross gain − capital losses = net gain → 50% discount → taxable gain

    Note the order matters: you apply capital losses first, then the discount. You can’t discount the gain and then subtract losses from the discounted amount — the ATO requires losses to come off the top. On a $200,000 gain with $40,000 of carried-forward losses, you discount $160,000 (not $200,000), giving a taxable gain of $80,000.

    The discount applies per asset, per CGT event. Sell three parcels of shares in the same year and each one is assessed on its own holding period.

    Who qualifies — and who doesn’t

    This is where the real money is lost, because the answer depends on what kind of taxpayer you are:

    Taxpayer type CGT discount
    Individual (Australian resident) 50%
    Trust (family/discretionary/unit) 50%
    Complying super fund 33.33%
    Company No discount
    Foreign or temporary resident Generally none on gains accrued after 8 May 2012

    The company rule catches out more small business owners than anything else in this guide. If your investment property or share portfolio sits inside a company structure, there is no 50% discount — the full gain is taxed at the company tax rate (25% for base rate entities, 30% otherwise). Sometimes the company rate still wins on the maths, but you need to actually do the maths rather than assume.

    For foreign and temporary residents, the rules tightened years ago: the discount is generally unavailable for gains accruing after 8 May 2012, though a partial discount can apply for periods when you were an Australian resident. If your residency changed during the holding period, this needs professional attention.

    There’s also a niche bonus worth knowing: investors providing affordable rental housing to eligible tenants may qualify for an additional discount of up to 10%, taking the total discount as high as 60%. The eligibility criteria are strict — don’t assume it applies without checking.

    Counting the 12 months (this is where people go wrong)

    The rule says “more than 12 months.” In practice:

    • Start date: the contract date you acquired the asset (not settlement)
    • End date: the contract date you disposed of it (not settlement)
    • Exclude both dates from the count

    Buy on 15 March 2025 (contract) and sell on 15 March 2026 (contract) and you have not held it for more than 12 months — you’ve held it for exactly 12 months, and exactly isn’t enough. Sell on 16 March and you qualify.

    For property bought off the plan, the clock starts at the contract date — which can be years before settlement. That’s good news: by the time you settle, you may already be most of the way to the discount.

    Shares and managed funds work the same way, but watch out for corporate actions. A share split or bonus issue generally doesn’t reset the clock. But if you participate in a buy-back, merger or demerger, the CGT rules can treat you as disposing of one asset and acquiring another — potentially restarting the 12 months. Check before accepting that takeover offer.

    Worked example: shares vs property

    The discount works identically across asset types. What differs is usually the size of the gain and the costs involved.

    Shares. Emma bought $60,000 of ETF units in June 2024 and sold them for $95,000 in August 2026 — a 26-month hold.

    • Gross gain: $35,000
    • No capital losses to apply
    • 50% discount: $17,500 taxable gain
    • At the 30% marginal rate (income $45,001–$135,000 in 2026-27), her tax on the gain is $17,500 × 30% = $5,250 (plus Medicare levy)

    Property. The same maths on a $180,000 property gain held 5 years: discount to $90,000, taxed at her marginal rate. At 30%, that’s $27,000 instead of $54,000. The discount saved her $27,000 — more than most people’s entire annual tax bill on their salary.

    This is why holding period is a genuine investment decision, not just a tax footnote. On a large property gain, selling in month 11 instead of month 13 can be a $20,000+ mistake.

    Model both scenarios in our free CGT calculator — toggle the holding period and watch what the discount does to the final bill.

    The discount and your other concessions

    The 50% discount doesn’t operate in isolation. The order of operations for a property sale with multiple concessions:

    1. Work out the gross gain (sale price minus cost base)
    2. Apply any exemptions first — e.g. the main residence exemption or partial exemption shrinks the gain before anything else
    3. Subtract capital losses — current year losses, then carried-forward losses
    4. Apply the 50% discount — to whatever remains
    5. Add to assessable income — taxed at your marginal rate plus Medicare levy

    Small business owners get an additional layer: the small business CGT concessions (15-year exemption, 50% active asset reduction, retirement exemption, rollover) can apply on top of the general 50% discount in some cases. If you’re selling business premises or business goodwill, the stacking of these concessions can legitimately reduce a large gain to almost nothing. This is specialist territory — but it’s the single highest-value area of CGT planning in Australia.

    Five ways people lose the discount

    1. Selling on day 364. The most expensive impatience in Australian tax. Check contract dates, exclude both endpoints, and if you’re close, wait.

    2. Holding the asset in a company. No discount, ever. If you’re choosing a structure for a new investment, model the CGT outcome before you commit — changing structures later usually triggers CGT itself.

    3. Forgetting the discount doesn’t apply to the loss side. Capital losses can’t be “discounted” — they’re subtracted in full before the discount. And you can’t use the discount to create or increase a capital loss.

    4. Assuming foreign residency doesn’t matter. If you were a temporary resident for part of the holding period, the discount may be reduced or denied for the post-8 May 2012 portion. The ATO has been active in this area.

    5. Not keeping acquisition records. No contract date, no discount. The ATO can and does ask for evidence of when you acquired the asset. For shares, keep your contract notes or broker statements; for property, the purchase contract.

    Frequently asked questions

    Do I need to hold for 12 months and a day?
    Effectively yes — “more than 12 months” means 12 months plus at least one day, measured contract date to contract date excluding both dates.

    Does the discount apply to crypto?
    Yes, crypto is a CGT asset like any other. Hold for more than 12 months as an individual and the 50% discount applies to the gain.

    Can companies get any CGT discount?
    No. Companies are specifically excluded from the CGT discount. They may benefit from other concessions (like the small business concessions), but not the 50% discount.

    What if I have capital losses — do I still get the discount?
    Yes, but losses are applied first. On a $100,000 gain with $30,000 of losses, you discount the remaining $70,000 to $35,000.

    Does the discount apply if I inherited the asset?
    You generally inherit the deceased’s acquisition date for discount purposes — so an asset they held for years can qualify immediately in your hands. But the main residence rules for inherited dwellings are separate and have their own two-year window.

    Is the 50% discount changing?
    It has been legislated for decades and applies for 2026-27. Any change would require new legislation — but it’s always worth confirming the current rules before a major sale, as tax law does change.

    The bottom line

    The 50% CGT discount is the closest thing Australian tax law offers to free money: hold for a year and a day, halve your taxable gain. The rules are mechanical, the traps are well-documented, and the payoff for getting it right is enormous relative to the effort involved.

    Before you sell anything significant, run the numbers both ways — with and without the discount — in our free CGT calculator. And if the asset is property, read our complete guide to CGT on property for the exemptions that stack on top.