How Capital Gains Tax on Property Works
Capital gains tax is not a separate tax with its own rate. When you sell a property for more than it cost you, the net capital gain is added to your taxable income for that year and taxed at your marginal rate. So two people selling the same property for the same gain can pay very different amounts, depending on what else they earn.
Three numbers drive the result:
- Your cost base. The purchase price plus buying costs (stamp duty, conveyancing, inspections), capital improvements, and selling costs (agent commission, legal fees). The bigger your cost base, the smaller the gain.
- Your capital gain. Sale price minus cost base. If it is negative, you have a capital loss, which cannot reduce your salary but carries forward to offset future gains.
- The 50% discount. Individuals who are Australian residents and have owned the asset for more than 12 months halve the gain before it is taxed.
For the full method with worked examples, read the NestPath capital gains tax guide.
When First Home Buyers Actually Pay CGT
Here is the reassuring part: your main residence is exempt. While a property is your home and does not produce income, the gain when you sell it is generally free of CGT, on land up to 2 hectares. Most first home buyers who live in their home pay nothing.
You typically face CGT in three situations:
- Rentvesting. You buy an investment property and rent where you actually live. The investment is fully subject to CGT (with the 50% discount if held over 12 months). See our rentvesting guide.
- Moving out and renting your first home. The 6-year rule can still exempt it: treat a former home as your main residence for up to 6 years while it is rented, as long as you do not claim another property as your main residence.
- Subdividing or developing. Splitting off part of your block or building to sell can bring CGT (and sometimes GST) into play.
Three Worked Examples
1. An investment property
Bought for $500,000 with $30,000 of stamp duty and legal costs, sold three years later for $600,000, owner on a $100,000 salary. Gross gain $70,000; after the 50% discount, $35,000 is added to income. The tax on the gain is about $11,200 (roughly $10,500 income tax plus $700 Medicare levy).
2. The home you lived in
Same purchase and sale, but you lived in it the whole time and never rented it. The main residence exemption applies, so the CGT is $0.
3. Home first, then rented (the 6-year rule)
You lived in it, then moved interstate and rented it out for four years before selling, with no other main residence claimed. Because the rental period is under six years, the 6-year rule keeps it exempt: CGT of $0. Rent it out for more than six years and only the gain beyond the six-year window becomes taxable.
What Changes on 1 July 2027
The 2026-27 Federal Budget reforms are now law. For gains that accrue on or after 1 July 2027, the 50% discount for individuals, trusts and partnerships is replaced by two mechanics working together: cost-base indexation (so only the real, above-inflation gain is taxed) plus a 30% minimum tax rate on that real gain.
Key points that stop this being a scare story:
- The main residence exemption is unchanged. Your home stays CGT-free.
- New residential builds keep the 50% discount, and investors in them can elect either method.
- Gains up to 1 July 2027 keep the current 50% discount. An asset held across the date is split using a market valuation at 1 July 2027, not a simple time split.
- It first affects tax returns for the 2027-28 income year, not Tax Time 2026 or 2027.
Use the compare toggle in the calculator for an illustration of how the same gain looks under each set of rules. Because the transitional valuation rules are still being finalised, treat that comparison as an estimate. For the policy detail, see our negative gearing and CGT changes explainer.
Selling an investment property? Get the timing right.
A gain of tens of thousands can swing your tax by thousands depending on timing, ownership and records. A registered tax agent pays for itself here. For the loan side, model your next purchase first.
Related Tools
Capital Gains Tax: Frequently Asked Questions
How much is capital gains tax on property in Australia?
There is no fixed CGT rate. Your net capital gain is added to your taxable income and taxed at your marginal rate (up to 45% plus the 2% Medicare levy). If you are an individual who held the property more than 12 months, a 50% discount halves the gain before it is taxed. As a worked example, an investor on a $100,000 income with a $70,000 gain would pay about $11,200.
Do first home buyers pay capital gains tax?
Usually not on the home they live in. Your main residence is fully exempt from CGT while it is your home and does not produce income, so most first home buyers pay $0 when they sell. First home buyers most often face CGT when they rentvest (buy an investment property and rent where they live) or move out and rent their first home beyond the 6-year limit.
What is the CGT 6-year rule?
If you move out of your main residence and rent it out, you can keep treating it as your main residence for up to 6 years and pay no CGT if you sell within that window, as long as you do not claim another property as your main residence at the same time. If the former home is not producing income, the exemption can continue indefinitely. Our full CGT guide works through the day-count maths.
How is capital gains tax calculated?
Take your capital proceeds (the sale price) and subtract your cost base (purchase price plus buying and selling costs plus capital improvements). Subtract any current or carried-forward capital losses first, then apply the 50% discount if you are an individual who held the asset more than 12 months. The result is added to your other income and taxed at your marginal rate. See the ATO method.
Is capital gains tax changing in Australia in 2027?
Yes, and it is now law. For gains that accrue on or after 1 July 2027, the 50% discount for individuals, trusts and partnerships is replaced by cost-base indexation (so only the real, above-inflation gain is taxed) plus a 30% minimum tax rate. The main residence exemption is unchanged, and new residential builds keep the 50% discount. Assets held across the date are split using a market valuation at 1 July 2027. See the ATO new-legislation page.
How can I reduce capital gains tax on property?
Live in it as your main residence (which is exempt), use the 6-year rule if you move out and rent, hold for more than 12 months so the 50% discount applies, keep records of every cost that adds to your cost base (stamp duty, legal fees, agent commission, capital improvements), and where possible time the sale for a lower-income year. Talk to a registered tax agent before relying on any of these.
When do I pay capital gains tax?
CGT is reported in the tax return for the income year in which the CGT event happens. For property sold under a contract, the CGT event is the contract date, not the settlement date, so a contract signed in June with settlement in July falls in the earlier financial year.
This calculator provides general information and estimates only, for Australian resident individuals. It is not tax advice and does not model depreciation or capital-works clawback, part-of-home rental, trusts, companies or SMSFs. Figures are based on ATO rates current at July 2026; 2026-27 base amounts and the 2027 transitional rules are still being finalised. Confirm your position with a registered tax agent before making decisions.