Capital gains tax is the bill that lands when you sell an investment property at a profit. The good news: you're only taxed on the net gain, and holding for 12 months can halve it.
What CGT actually taxes
A capital gain is the profit when you sell an asset for more than it cost you. CGT isn't a separate tax — the net gain is added to your income and taxed at your marginal rate in the year you sell. You're taxed on the net gain, after costs, losses and any discount.
The 50% discount
If you've owned the asset for 12 months or more, Australian residents generally get a 50% CGT discount — you're taxed on only half the net gain. Sell inside 12 months and you lose it, which is a big difference.
How it's calculated
- Capital proceeds — what you sold for.
- Cost base — purchase price plus buying costs (stamp duty, conveyancing) and selling costs (agent commission, conveyancing).
- Capital gain — proceeds minus cost base.
- Apply losses — subtract any current or carried-forward capital losses.
- Apply the 50% discount (if eligible).
- Report the net gain in your tax return.
Worked example
Buy for $500,000 (plus $15,000 stamp duty and $1,200 conveyancing); sell for $600,000 (less $12,500 agent commission and $1,300 conveyancing). Cost base = $530,000. Gain = $600,000 − $530,000 = $70,000. After the 50% discount, you report $35,000 and pay tax on that at your marginal rate.
Joint ownership splits the gain
If you own with someone else, the gain is split by ownership share before the discount. On a $70,000 gain, a 60/40 split is $42,000 and $28,000; after the 50% discount, each owner reports $21,000 and $14,000.
The main exemptions
- Your main residence is generally CGT-exempt.
- The six-year rule can keep a former home exempt for up to six years while it's rented.
- Assets bought before 20 September 1985 are exempt.
- An SMSF selling a property in the retirement (pension) phase may be exempt.
And a common myth worth killing: there's no age exemption from CGT in Australia. Timing matters too — the gain is recognised on the contract date, not settlement.
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Book a Clarity Call — It's FreeCommon questions
How is capital gains tax calculated on an investment property?
Subtract the cost base (purchase price plus buying and selling costs) from the sale price to get the gain, apply any capital losses, then apply the 50% discount if you've held it 12+ months. The result is added to your income and taxed at your marginal rate.
What is the 50% CGT discount?
Australian residents who hold an asset for at least 12 months are generally taxed on only half the net capital gain. Selling within 12 months forfeits the discount, so holding period can make a large difference to the tax.
At what age do you stop paying capital gains tax?
There is no age-based exemption from CGT in Australia. You pay regardless of age unless another exemption applies (such as the main residence exemption or an SMSF selling in the pension phase).
This article is general information only and doesn't take your personal circumstances into account. It isn't financial, tax or investment advice. Tax rules and lender policies change — confirm your position with a licensed professional or the ATO before making decisions.
