Kee › Rental property tax guide › CGT when you sell
Selling an investment property: how is CGT worked out?
When you sell an investment property at a profit, you pay capital gains tax (CGT). CGT isn't a separate tax: the gain is added to your income for the year and taxed at your rate. Getting it right comes down to the cost base and the discount.
- Capital gain = sale price − cost base
- Contract signed before 1 July 2027, held at least 12 months, Australian resident: the gain is halved
- From 1 July 2027: the 50% discount is replaced by indexing the cost base to inflation, plus a 30% minimum tax
- Timing follows the contract date, not settlement
1. What goes into the cost base
| Element | Examples |
|---|---|
| Purchase price | The contract price |
| Incidental costs of buying and selling | Stamp duty, legal fees, agent's commission, valuation fees |
| Costs of owning | Interest, rates and similar costs you haven't claimed as deductions (for most rentals these were already claimed each year, so they can't be counted again) |
| Capital costs | Renovations and extensions; fixing damage that was there when you bought |
| Defending your title | For example, legal fees in a title dispute |
Anything you've already claimed as a deduction, including capital works deductions each year, can't go into the cost base. In the year you sell, your accountant takes the capital works you've claimed off the cost base.
2. The 50% discount (sales before 1 July 2027)
- If you've held the property for at least 12 months and you're an Australian resident for tax, the gain is halved before it's added to your income
- The 12 months runs from the purchase contract date to the sale contract date
- Foreign and temporary residents: no discount for periods as a foreign resident on assets acquired after 8 May 2012
3. The new rules from 1 July 2027
Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026:
- For CGT events from 1 July 2027 (for a sale, the contract date), individuals no longer get the 50% discount
- Instead, the cost base is indexed to inflation (CPI), so only the "real" gain is taxed
- A 30% minimum tax applies to real capital gains
- Properties held across 1 July 2027: the gain is split in two. The part up to 1 July 2027 keeps the 50% discount; the part after uses the new rules. The value at 1 July 2027 can be a market valuation at that date, or an apportionment method set by the Minister
If you plan to sell around 2027, or wonder whether to get a valuation at 1 July 2027, ask your accountant to run your numbers first. A valuation isn't always worth it; it depends on whether the property grows faster before or after 2027.
4. Your home and the 6-year rule
- Selling the home you've always lived in (your main residence) is generally CGT-free
- If you lived there, moved out and rented it: for up to 6 years after moving out it can still be treated as your main residence. Each time you move back in and out again, the 6 years restarts
- Beyond 6 years: only a partial exemption. Usually the market value when it was first rented becomes the starting point, and CGT applies to the share of days beyond the 6 years
- If you're a foreign resident when you sell, you generally can't use the main residence exemption (with limited exceptions)
5. Documents for the year you sell
- Purchase and sale contracts and settlement statements
- Agent's commission, legal fees and stamp duty
- Invoices for renovations and extensions
- Past depreciation schedules and tax returns (to take off the capital works claimed)
- If you lived there: the dates you moved in, moved out and first rented it
- A clearance certificate: Australian residents need one from the ATO before settlement too, or the buyer must withhold 15% of the price and pay it to the ATO. It can take up to 28 days and is valid for 12 months
Common questions
Does CGT use the contract date or the settlement date?
The contract date. Sign in June and settle in July, and the gain falls in the financial year ending that June. The 12-month test and the 1 July 2027 cut-off also go by contract date.
What if I sell at a loss?
A capital loss can be used against capital gains this year or in later years, but not against your salary. Any unused loss carries forward.
Do the 2027 changes affect a property I already own?
Yes. If you sell after 1 July 2027, the gain is split: the part before keeps the 50% discount, and the part after uses inflation indexing and the 30% minimum tax.
Do Australian residents need a clearance certificate?
Yes. Since 1 January 2025 it applies to every property sale, with no price threshold. If the buyer doesn't have it by settlement, they must withhold 15% of the price.
Sources
- ATO · Cost base of asset: https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/calculating-your-cgt/cost-base-of-asset
- ATO · CGT discount: https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/cgt-discount
- ATO · CGT events (contract date): https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/cgt-events
- ATO · Treating former home as main residence: https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/your-main-residence---home/treating-former-home-as-main-residence
- ATO · Foreign residents and CGT: https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/your-residency-status-and-cgt
- ATO · Clearance certificates: https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/australian-residents-and-clearance-certificates
- Treasury Laws Amendment (Tax Reform No. 1) Act 2026: https://www.legislation.gov.au/C2026A00049/asmade/text
Tax time, without the paperwork chase
If your accountant uses Kee, you just send voice notes, photos and zips on WhatsApp. Kee chases what's missing, your accountant checks it, you sign, and it goes to the ATO.
Watch the 1-minute demoAre you an accountant? See how Kee helps you