Capital gains tax on property

You can get hit with capital gains tax on property when you sell an investment property for a profit. But for most Australians, your home is exempt from CGT.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

Finder logo checkmark
This article was fact-checked and reviewed by , an accredited buyer's agent, licensed real estate agent and the author of Positively Geared. Content has been updated for 2021.

Capital gains tax, or CGT, is a tax you may have to pay when you on property when you sell it and make a profit. Fortunately, you usually don't have to pay CGT on your own home, and you may be exempt in certain cases for an investment property. And if you have to pay capital gains tax on a property you're selling, you may qualify for a 50% CGT discount. This applies if you've owned the property longer than 12 months.

If you are a property investor, make sure you learn the rules around capital gains tax and how full and partial exemptions can save you money. You can get an estimation of your CGT obligations using our CGT estimate calculator.

What is capital gains tax on property?

Picture not described

CGT is a tax that is levied on the profits you make when you dispose of (or sell) an asset. It applies to assets that were purchased on or after 20 September 1985. CGT is calculated by subtracting the cost involved in acquiring and holding an asset from the proceeds of the sale of the asset.

Any gain or profit made on the sale of a CGT asset is included in your assessable income in the financial year that you sell the asset. This means the profit is added to your taxable income. The following example will help illustrate this point:

  • You earn $80,000 in your job
  • You sell an investment property and make a $100,000 profit after all deductions
  • You add $100,000 to your taxable income for the year
  • The ATO would then tax you as if you have earned $180,000.

For the sale of an asset where a contract is involved, such as property, CGT is assessed from the date of the contract, not the settlement. For a sale with no contract, CGT is assessed after you stop being the asset's owner.

When you're selling a home, any profit you make above the cost of acquiring and maintaining the home is considered a capital gain.

How much CGT will I have to pay?

You can use our CGT calculator to estimate your capital gains costs when selling a property or other asset. Please keep in mind that it's not possible to give an exact calculation of your costs using this calculator, but it can help you get a better understanding of how capital gains will affect your tax.

Have you owned the asset for more than 12 months?

Purchase price

$

Sold price

$

Current taxable income

$

Disclaimer: The information provided by this calculator is only intended to provide an approximate estimate of the CGT you may need to pay. It is general in nature and does not constitute professional advice. The rules relating to CGT are complex and you should always seek professional advice in relation to your particular circumstances.


How is capital gains tax calculated?

If you're selling an investment property, the CGT calculation is based on the sale price of a property minus your expenses. These expenses are called your cost base. The cost base is the total sum of the original purchase price plus any incidentals, ownership and title costs minus any government grants and depreciable items. Depreciable building items were not included in the cost base calculations prior to 1997.

  • Incidental costs. These include stamp duty, legal fees, agent fees and advertising and marketing fees.
  • Ownership costs. These include rates, land tax, maintenance and interest on your home loan. Note that you can only add rates, land tax, insurance and interest on borrowed money to your cost base if you acquired the property after 20 August 1991 or didn't use the property to produce an assessable income (e.g. vacant land or main residences).
  • Improvement costs. These include replacing kitchens, bathrooms or any other improvements you've made on the property.
  • Title costs. These include legal fees associated with organising and defending your title on the property.

Image of a calculator.

Calculating capital gains tax is relatively simple:

  • Step 1: Calculate your cost base

Purchase price + all costs - FHOG (First Home Owner Grant) and claimed depreciation = cost base

  • Step 2: Subtract cost base from your property's sale price

Sale price - cost base = capital gain or loss

Once you've worked out the capital gain, the figure is then adjusted according to a number of variables, including the following:

  • Any percentage of time when you owned the property that it was rented out and not your main place of residence.
  • If you've held the property for longer than 12 months, you are eligible to receive a 50% discount.

There are three methods of calculating capital gains tax:

MethodDescriptionHow to calculate
Other method
This calculation method is for those who have held an asset for less than 12 months.
This is the most basic method of CGT calculations.Take the cost base away from the sale price.
Discount method
This method is for those holding assets for more than 12 months.
Those using this method are entitled to a 50% discount off of the CGT liability for individuals or a 33.3% discount off of the CGT liability for super fundsTake the cost base away from capital proceeds and deduct capital losses. Then take your discounted percentage and reduce the amount by it.
Indexation method
If you bought the asset before 11:45am (ACT time) 21 September 1999 AND owned the property for more than 12 months.
You can increase the cost base by applying an indexation factor based on the Consumer Price Index (CPI) up to September 1999.For more information on this calculation method, visit the ATO website.

*Based on information from the ATO.

Once these factors are worked out, you'll be left with the amount of capital gains that will be included in your taxable income and taxed at your marginal rate. There are ways to avoid capital gains tax, though, whether fully or partially.

Full CGT exemptions

Some situations can see you avoid capital gains tax entirely. Depending on your circumstances, you may be eligible for a full exemption.

Time of purchase

Property is exempt from capital gains tax if it was purchased before 20 September 1985.

Main place of residence

You can avoid paying CGT if you sell a dwelling that's considered your main place of residence. You can only ever have one main residence at any given time unless you're selling your main residence and buying another. In this case, you're entitled to an overlap period of 6 months as long as the new property will be your new main residence, you lived in the old property for at least 3 continuous months in the 12 months before you sold it and it wasn't used to produce rent in this same 12-month period. The ATO doesn't give an exact description of what constitutes a main residence, but gives the following points to consider:

  • You and your family live in the dwelling.
  • Your mail is delivered there.
  • You have your personal belongings there.
  • You're registered to vote at the property's address.
  • You have connected a phone, gas and electricity to the property.

If you've lived in your home for the whole time you've owned it, haven't rented it out either completely or to a lodger and the land is smaller than two hectares, you'll get a full exemption on CGT when you sell. This is helpful if you plan to live the renovator's life: selling your home, moving into another, renovating it and then selling the renovated property. And while you won't make a rental income if you go down this path, all profits made from the renovation are exempt from CGT.

Temporary absence – the six-year rule

If you have to move out of your home and choose to rent it out, you may be exempt from some CGT liability under the "Temporary Absence Rule".

What is the rule? If you move out of your home and rent it out, under the law, the property is still treated as your principal residence for a period of up to six years. If you sell the property within this time frame, you will be exempt from paying CGT if you profit from the sale. You are also exempt from paying capital gains on the income generated from the leasing of the property.

What's the catch? You will still need to pay CGT on the sale of one of your dwellings.

If you're moving out of your home and renting it out, you're going to need somewhere else to live. You will need to elect one of the two dwellings as your principal place of residence and a tax will be applied to the sale of your non-primary property.

SMSF investment

Buying a property through your SMSF is one way you can generate profits from residential real estate and avoid paying CGT. You use your super fund to purchase the home along with an SMSF property home loan to make up the total. The loan is then paid off through your super contributions.

If you sell the property once you've retired, you'll pay no capital gains on the property. Even if you sell the property while you're still accumulating your super, this will be taxed at a rate of only 15%. Holding onto the property for longer than a year will effectively drop this rate to 10%.

Buying a property with your SMSF comes with some risks, so you should never attempt it without first seeking professional advice.

Partial CGT exemptions

While avoiding CGT liability altogether may not be possible if you haven't lived in the property before you rented it out, you can still apply for partial exemptions in some circumstances.

Making an investment property your main residence

If you changed your mind and decided to live in a property you purchased as an investment, you'll be partially exempt from capital gains tax. In this case, the CGT you'll owe will be worked out by comparing the number of days you lived in the property to the number of days you rented the property.

Bill's capital gains tax issue

How capital gains tax worksBill buys a property and rents it out for two years, but later decides to move into it and lives in it for six years. He then sells it, making a capital gain of $400,000.

He only has to pay CGT on a quarter of that amount, which works out to be two years out of the eight that are not eligible for an exemption.

This means Bill would add $100,000 to his taxable income because of the CGT. He's also held onto the property for longer than 12 months, so after taking into account the 50% discount he's entitled to because of this, he would be able to get away with an increase to his taxable income of just $50,000.

Using your main residence as a business

If your main residence is being used to generate income, the CGT exemption is reduced accordingly. The Australia Tax Office has clear differences between the two following types of businesses: a "place of business" or a "place of convenience". Different rules may apply according to how you use your main residence, so it's best to consult your accountant to see which situation applies to you.

If you are over 55 and sell a small business property, there may be a $500,000 portion that is exempted from CGT. A sale of a small business when used to support your retirement is also exempt.

What can I deduct if I'm using my main residence as a business?

It's important to consider the additional cost of CGT that could apply to the business portion of your home. This could be applied to the sale of your main residence in the future.

Maintenance costs (allowable for both a place of business and a place of convenience)

  • Utility bills
  • Depreciation of office furniture and assets

Ownership costs (only allowed for a place of business)

  • Rent and mortgage repayments
  • Interest charged on the loan
  • Insurance premiums

Holding an asset for more than 12 months

While this isn't technically an exemption, if you buy an investment property and hold it for more than 12 months, you're entitled to a 50% discount on the amount of CGT payable. The discount is 33.3% for super funds.

Investing in affordable housing

From 1 January 2018, investors who invest in qualifying affordable housing will receive an additional 10% discount, bringing their CGT discount to a maximum of 60%. To qualify, the investment property must be provided below market rent and made available to tenants with low to moderate incomes. It must also be managed by a registered community housing provider, and the property must be held as affordable housing for a minimum of three years.

What if I've made a loss?

A capital loss is when you've sold the asset for less than your "reduced" cost base. A reduced cost base is the same as a normal cost base, although it also includes any balancing adjustments such as improvements to the property.

You can offset any capital losses you've made for the year against any capital gains you've made and this will reduce the amount of capital gains that'll be included in your taxable income. However, you can't deduct capital losses from taxable income. You can also carry any capital losses forward in future years and offset these against capital gains you've made.

Get professional advice about your capital gains tax issue

Capital gains tax is a complex area of Australian taxation law, so sometimes you might need an expert to help you deal with these matters. When you engage a tax specialist, their fee is generally tax-deductible.

  • Individuals starting from $79*
  • Sole trader starting from $150*
  • Ride sharing tax returns start from $110*

FinTax Group Offer

Qualified to handle your tax and financial needs.

Helps you complete your tax return if you have more than one job or income from other sources such as investments.

Offers a wide range of services from tax advice to business set-up and advisory.

Promoted

Need general help with your tax preparation? Compare your options below

Name Product Fee for unlimited income items (Wages) Deduction Item Fees Online tax returns
FinTax Group
$79*
$0 for up to $1000 of deductions
$65 for an investment property
Australia wide
Lodge individual & company tax returns online or in-person. Fast online form with additional options to complete tax returns for investment properties, sole trader tax and share investments.
Refund Express
$79*
$0 when you purchase the $49 income package
Australia wide
Option to pay with your tax refund for an extra fee of $10 for basic returns. Lodge individual & company tax returns. Fast online form & free live chat.
Everest Tax & Business Advisors
$80*
Business tax: starting from $250
General deductions: $0
For motor vehicle expenses: $15
Australia wide
A boutique firm that provides personalised experiences for all customers. Ideal option for individuals and small businesses based in Perth.
One Minute Tax
$99*
$0
Australia wide
Option to pay with your tax refund for an extra fee of $20. Lodge individual & company tax returns. Fast online form & free live chat. Special offer for business owners: Register your new company for only $499 (includes $488 worth of government fees and $100 cashback into your new business bank account). Click 'Go to site' to find out more. T&Cs apply.
Taxgain
$99*
$0 for up to 2 deductions
$29 for additional deductions
Australia wide
Option to pay with your tax refund for an extra fee of $29. Online and in-person tax services for individuals, sole traders and companies.
Hotman & Brown
$99*
Business tax: starting from $179
$29 for up to 2 deductions
Additional $29 for extra deductions
N/A
Option to pay with your tax refund for an extra fee of $29. Basic tax returns over the phone Australia-wide. In-person individual and business tax returns in Melbourne.
Bennetts Tax & BAS service
$155*
finder Exclusive: $5 discount
$0 for all work related deductions
Australia wide
finder Exclusive: $5 discount when you apply for a tax return with Bennetts Tax through finder. Click 'Go to site' and complete the contact form to find out more. Income item fee includes returns on interest, dividends, Superannuation and pension. A flexible option for individuals, sole traders and companies.
loading

Compare up to 4 providers

Name Product Fee for unlimited income items (Wages) Deduction Item Fees Online tax returns
One Minute Tax
$99*
$0
Australia wide
Option to pay with your tax refund for an extra fee of $20. Lodge individual & company tax returns. Fast online form & free live chat. Special offer for business owners: Register your new company for only $499 (includes $488 worth of government fees and $100 cashback into your new business bank account). Click 'Go to site' to find out more. T&Cs apply.
Refund Express
$79*
$0 when you purchase the $49 income package
Australia wide
Option to pay with your tax refund for an extra fee of $10 for basic returns. Lodge individual & company tax returns. Fast online form & free live chat.
FinTax Group
$79*
$0 for up to $1000 of deductions
$65 for an investment property
Australia wide
Lodge individual & company tax returns online or in-person. Fast online form with additional options to complete tax returns for investment properties, sole trader tax and share investments.
Taxgain
$99*
$0 for up to 2 deductions
$29 for additional deductions
Australia wide
Option to pay with your tax refund for an extra fee of $29. Online and in-person tax services for individuals, sole traders and companies.
Everest Tax & Business Advisors
$80*
Business tax: starting from $250
General deductions: $0
For motor vehicle expenses: $15
Australia wide
A boutique firm that provides personalised experiences for all customers. Ideal option for individuals and small businesses based in Perth.
Bennetts Tax & BAS service
$155*
finder Exclusive: $5 discount
$0 for all work related deductions
Australia wide
finder Exclusive: $5 discount when you apply for a tax return with Bennetts Tax through finder. Click 'Go to site' and complete the contact form to find out more. Income item fee includes returns on interest, dividends, Superannuation and pension. A flexible option for individuals, sole traders and companies.
loading

Compare up to 4 providers

Name Product Fee for unlimited income items (Wages) Deduction Item Fees On-site tax returns
FinTax Group
$79*
$0 for up to $1000 of deductions
$65 for an investment property
Sydney
Lodge individual & company tax returns online or in-person. Fast online form with additional options to complete tax returns for investment properties, sole trader tax and share investments.
Taxgain
$99*
$0 for up to 2 deductions
$29 for additional deductions
Sydney
Option to pay with your tax refund for an extra fee of $29. Online and in-person tax services for individuals, sole traders and companies.
loading

Compare up to 4 providers

Name Product Fee for unlimited income items (Wages) Deduction Item Fees On-site tax returns
Hotman & Brown
$99*
Business tax: starting from $179
$29 for up to 2 deductions
Additional $29 for extra deductions
Melbourne
Option to pay with your tax refund for an extra fee of $29. Basic tax returns over the phone Australia-wide. In-person individual and business tax returns in Melbourne.
One Minute Tax
$99*
$0
Melbourne
Option to pay with your tax refund for an extra fee of $20. Lodge individual & company tax returns. Fast online form & free live chat. Special offer for business owners: Register your new company for only $499 (includes $488 worth of government fees and $100 cashback into your new business bank account). Click 'Go to site' to find out more. T&Cs apply.
loading

Compare up to 4 providers

Name Product Fee for unlimited income items (Wages) Deduction Item Fees On-site tax returns
Everest Tax & Business Advisors
$80*
Business tax: starting from $250
General deductions: $0
For motor vehicle expenses: $15
Perth
A boutique firm that provides personalised experiences for all customers. Ideal option for individuals and small businesses based in Perth.
loading

Compare up to 4 providers

Name Product Fee for unlimited income items (Wages) Deduction Item Fees On-site tax returns
Bennetts Tax & BAS service
$155*
finder Exclusive: $5 discount
$0 for all work related deductions
Canberra
finder Exclusive: $5 discount when you apply for a tax return with Bennetts Tax through finder. Click 'Go to site' and complete the contact form to find out more. Income item fee includes returns on interest, dividends, Superannuation and pension. A flexible option for individuals, sole traders and companies.
loading

Compare up to 4 providers

*This is the minimum fee charged for income item tax returns. The price listed on this table is subject to terms and conditions. To find out more or to receive an accurate quote for your tax return, please visit the agent's website to submit an enquiry.

*The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs. You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.

Other tax tips: negative gearing benefits

Even if you can't improve or reduce your CGT bill, there are other tax savings you could be making. A low-rate home loan can sometimes turn your investment property from a cash-flow negative to a cash-flow positive property while still seeing you receive negative gearing benefits.

Frequently asked questions about Capital Gains Tax

You can also compare some home loans below to see what rates, features and fees are possible with an investment property.

Compare investor home loans

$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Athena Variable Home  Loan
2.39%
2.39% p.a.
$0
$0 p.a.
60%
$585.25
Investors with large 40% deposits or equity can get this low variable rate. A competitive option for investors looking to refinance.
UBank UHomeLoan Fixed
1.99%
2.70% p.a.
$0
$0 p.a.
80%
$554.81
Limited time offer.
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender. Apply by 30 June 2021 and settle within 90 days to get this low rate.
loans.com.au Smart Booster Discount Investor Variable Home Loan
1.99%
2.71% p.a.
$0
$0 p.a.
80%
$554.81
If you have an owner occupier loan with loans.com.au you can also get this very low rate variable mortgage for your investment property. Principal and interest repayments. Add an offset account for an additional 0.10% on your interest rate. Get your loan processed fast and settle within 30 days.
Well Home Loans Balanced Fixed Home Loan
2.29%
2.29% p.a.
$250
$0 p.a.
90%
$577.55
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee. Not available for construction purposes.
homeloans.com.au Low Rate Home Loan with Offset
2.59%
2.42% p.a.
$0
$0 p.a.
60%
$600.83
This competitive variable rate loan is for investors who want interest-only repayments. You will need a 40% deposit.
loading

Compare up to 4 providers

eChoice Logo

Enter your details below to receive an obligation-free quote from an eChoice home loans expert today

Are you currently employed?

Have you found a property yet?

eChoice is an award-winning broker with over 18 years of experience, and has helped more than 50,000 Australians to find the right home loan.

  • Completely free, expert home loan advice.
  • Offers a suite of digital tools to make you a smarter borrower.
  • Calculate your borrowing power with a free personalised home loan report.

eChoice Lender Logos

Technology Platform of the Year 2016

Australian Broking Awards

More guides on Finder

Home Loan Offers

Important Information*
Go to site