Selling an investment property is one of the most significant CGT events most Australians will ever face. A $300,000 capital gain can trigger $50,000–$80,000 in CGT for a high-income earner. But with the right strategies applied in the right order, that liability can be significantly — and legally — reduced. This guide covers every lever available to Australian property investors in 2026.
How CGT on Investment Property Works in Australia
When you sell an investment property for more than your cost base, the difference is a capital gain. Per the ATO, that gain is added to your assessable income for the year of sale and taxed at your marginal rate. The CGT event occurs on the date of the contract — not settlement — so timing your sale can shift the gain into a different financial year.
| Capital Gain | Your Income | No Discount (under 12mo) | With 50% Discount (12mo+) | Tax Saving from Discount |
|---|---|---|---|---|
| $200,000 | $80,000 | $74,000 | $37,000 | $37,000 |
| $300,000 | $100,000 | $121,500 | $60,750 | $60,750 |
| $500,000 | $120,000 | $210,000 | $105,000 | $105,000 |
| Holding 12+ months is the single most valuable tax strategy | Saves $37k–$105k+ | |||
Strategy 1 — Hold for at Least 12 Months (50% CGT Discount)
The 50% CGT discount is the most powerful tool available to Australian property investors. Holding your investment property for at least 12 months before selling halves your taxable capital gain. This is not an optional strategy — it's the foundation of every other approach.
Strategy 2 — Maximise Your Cost Base
Your cost base is subtracted from your sale price to calculate the gain. Every dollar you add to the cost base reduces your CGT. Many investors undercount their cost base and pay more CGT than necessary.
What can be included in your cost base:
- Purchase price — the original price you paid
- Stamp duty — often $15,000–$40,000 on a typical investment property
- Legal and conveyancing fees — at purchase
- Buyer's agent fees — if you used one
- Capital improvements — renovations, extensions, structural work that added value (not repairs)
- Selling costs — agent commission, advertising, legal fees at sale
Strategy 3 — The 6-Year Absence Rule
If you lived in the property as your main residence before renting it out, you may be able to treat it as your principal place of residence for up to 6 years while renting. This can fully or partially eliminate CGT on the eventual sale.
How it works:
- You must have actually occupied the property as your main residence at some point
- You can only have one main residence at a time (with limited exceptions)
- The 6-year clock resets if you move back in, then move out again
- If you sell within 6 years of moving out, the property may be fully CGT-exempt
- If you sell after 6 years, a partial exemption may apply
Strategy 4 — Time Your Sale Year Strategically
Because capital gains are taxed at your marginal rate, selling in a year when your income is lower results in less CGT. The gain is taxed at the rate that applies to your income after the gain is added.
Lower-income years to target:
- Year of retirement or early retirement
- Parental leave year (if your income drops significantly)
- Career break or sabbatical
- Year a business makes a loss
- Year you have significant deductible expenses
Remember: the CGT event is the contract date, not settlement. If you sign contracts in June but settle in August, the gain is declared in the financial year of signing. This gives you precise control over which year the gain falls.
Strategy 5 — Offset Capital Losses
Capital losses from shares, crypto, or other assets can directly offset your capital gain, reducing your taxable CGT amount. Per ATO ordering rules, losses must be applied before the 50% discount — so applying a $50,000 loss to a $200,000 gain reduces the discountable amount to $150,000, with only $75,000 taxable.
If you're planning a property sale and hold underwater shares or crypto, consider whether crystallising those losses in the same financial year makes sense. Always weigh the CGT saving against the investment implications.
Strategy 6 — Joint Ownership and Spousal Transfer
If a property is owned jointly, each owner declares only their share of the gain. If one owner is on a lower marginal rate, the total household CGT can be significantly lower than if a single higher-income owner holds the property.
| Ownership Structure | Taxable Gain Each | CGT Rate | Total CGT |
|---|---|---|---|
| Single owner on $180k income | $150,000 | 45% + 2% | ~$70,500 |
| Joint — $180k + $60k income | $75,000 each | Mixed | ~$47,250 |
| Tax saving from joint ownership | ~$23,250 | ||
Based on $300,000 gross gain, 50% discount applied. Illustrative only — your outcome depends on specific incomes and circumstances.
Calculate Your Exact CGT Liability — Free
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Open CGT Calculator →The 2026 Proposed CGT Reform — What Property Investors Need to Know
The Australian government is reportedly considering replacing the 50% CGT discount for individuals with an inflation indexation model, potentially from 1 July 2026. Under this model, only the real (inflation-adjusted) gain would be taxable — not 50% of the nominal gain.
For investors who purchased decades ago, this could either increase or decrease CGT depending on the actual inflation during the holding period relative to the 50% discount value. Use our 2026 reform modeller to compare your specific outcome under both systems.
Frequently Asked Questions
How much CGT will I pay on a $500,000 property profit in Australia?
At a 45% marginal rate with the 50% CGT discount applied, you'd pay approximately 22.5% of $500,000 = $112,500 in CGT (plus 2% Medicare levy = $10,000, total ~$122,500). At a 37% marginal rate, the liability is approximately $96,250 total. Use our calculator for your exact figures.
Can I avoid CGT if I reinvest the money?
No — unlike some other countries (e.g. the US 1031 exchange), Australia does not allow CGT deferral through reinvestment for individuals. The only rollover relief available is in specific circumstances like deceased estate transfers, marriage breakdown, or small business concessions.
Does the main residence exemption apply to multiple properties?
No — you can only have one main residence at a time for CGT purposes (with limited exceptions). Married couples can potentially maintain two main residences for up to 6 months during a transition period. For all other periods, you must nominate one property as your main residence.