Capital Gains Tax on Property in Australia: Practical Guide

Short answer

Capital gains tax is part of Australia's income tax system. A net capital gain can be included in assessable income when a CGT event happens, commonly when a property is sold under a contract.

The result is not simply sale price minus purchase price multiplied by a tax rate. Cost-base adjustments, ownership, capital losses, the main-residence rules, acquisition timing and the calculation method can all change the amount.

Use the Capital Gains Tax Calculator only for an indicative scenario. It does not model every ATO rule and is not a tax return calculation or ruling.

The basic calculation sequence

A simplified process is:

1. Identify the CGT event and its date.
2. Work out the capital proceeds.
3. Work out the cost base or reduced cost base.
4. Calculate the capital gain or loss.
5. Apply current-year and carried-forward capital losses in the required order.
6. Apply an available discount or concession.
7. Include the resulting net capital gain in the relevant tax return.

The income-tax outcome then depends on the taxpayer's full circumstances. That is why a flat marginal-rate illustration is not the same as an estimate of tax payable.

What can be included in the cost base

Depending on the transaction and tax treatment, the cost base may include:

• money or property given to acquire the asset;
• incidental acquisition and disposal costs, such as eligible legal fees and agent commission;
• certain non-capital ownership costs;
• capital expenditure that increases or preserves the asset's value; and
• capital expenditure that establishes, preserves or defends title or rights.

Amounts already deducted, recouped or otherwise adjusted may need to be excluded or reduce the cost base. Capital works deductions can also affect it. Keep settlement statements, contracts, invoices, depreciation schedules and records of property use.

The CGT discount and the September 1999 date

Eligible Australian resident individuals and trusts may generally use the CGT discount when the relevant asset has been owned for at least 12 months and the other conditions are met. Capital losses are applied before the discount.

The 21 September 1999 acquisition date does not exclude an older post-CGT asset from the discount method. For an eligible asset acquired before 11.45 am AEST on 21 September 1999 and held for at least 12 months, an individual or trust may be able to choose between:

• the discount method; and
• the indexation method, with indexation frozen at the September 1999 quarter.

Assets acquired after that time cannot use the indexation method, although the discount method may still be available when its conditions are met. Companies generally cannot use the 50% CGT discount. Different percentages and rules apply to complying superannuation entities and other taxpayers.

Worked scenario

Assume an Australian resident individual bought an investment property in 2018 and later sold it after more than 12 months.

If there are no capital losses and the 50% discount applies, the discounted gain in this simplified scenario is $87,500.

That $87,500 is not a standalone "CGT bill". It is a modelled discounted capital gain before considering the taxpayer's other gains, losses, income, offsets and circumstances.

Main-residence rules need dates and use history

A dwelling that was a taxpayer's main residence can receive a full or partial exemption when the statutory conditions are met. Important details can include:

• when the taxpayer acquired and occupied it;
• whether any part produced income;
• whether the taxpayer moved out and made an absence choice;
• whether another dwelling was treated as the main residence;
• the land area and use; and
• the taxpayer's residency status.

The commonly described six-year absence rule is not an automatic exemption for every former home. Its application depends on property use, choices and whether another property is nominated.

Pre-CGT land and later improvements

Property acquired before 20 September 1985 is often described as pre-CGT, but later capital improvements can require separate analysis. A qualifying post-CGT improvement may be treated as a separate CGT asset when statutory conditions are met.

The current calculator does not model that separate-asset treatment. It also does not model indexation for eligible assets acquired between 20 September 1985 and 21 September 1999.

Common mistakes

• Treating sale price minus purchase price as the final taxable gain.
• Applying a marginal tax rate before capital losses and the discount.
• Assuming the September 1999 date prevents an older eligible asset using the discount method.
• Assuming a former home is fully exempt without checking use and absence periods.
• Adding costs already claimed as deductions to the cost base.
• Ignoring ownership shares, residency, inherited-property rules or later improvements.
• Calling an online estimate the amount of CGT payable.

Records to keep

Keep records that support acquisition, disposal, improvements, ownership, rental periods, main-residence use and any amounts deducted. The ATO generally requires CGT records to be retained for five years after the relevant event, with longer practical retention often needed where the asset has not yet been sold.

Sources

• ATO: Real estate and main residence, including examples where eligible pre-21 September 1999 property can use the discount or indexation method. Checked 19 August 2026.
• ATO: Indexation method, including the 21 September 1999 acquisition cutoff and September 1999 indexation freeze. Checked 19 August 2026.
• ATO: Capital gains tax, checked 19 August 2026.

General information disclaimer

This guide provides general information only. It is not tax, legal, financial or investment advice and does not calculate a tax return or provide an ATO ruling. CGT outcomes depend on transaction dates, ownership, property use, residency, losses, cost-base evidence and other circumstances. Check current ATO guidance and speak with a registered tax agent before relying on a result.

Last updated: 19 August 2026.