The Master Guide to CGT on Australian Property

If you are selling a property in the 2025-26 financial year, you are likely facing a significant tax event. With property prices remaining resilient across many Australian markets, the potential "gain" can be substantial.

What is Capital Gains Tax (CGT)?

Technically, there is no separate tax called "Capital Gains Tax." Instead, any net capital gain you make during the financial year is added to your taxable income and taxed at your marginal rate.

The 50% CGT Discount

This is the single most important rule for property investors. If you have held a property for more than 12 months, you are entitled to a 50% discount on the net capital gain.

Common Exemptions

1. The Main Residence Exemption

Generally, your "family home" (Principal Place of Residence or PPOR) is exempt from CGT. However, this can become complicated if you have used the home to produce income (e.g., Airbnb or a home office) or if you moved out and rented it.

2. The 6-Year Rule

You can continue to treat a property as your main residence for up to 6 years if you move out and rent it, provided you don't treat any other property as your main residence during that period.

How to Calculate Your Cost Base

To minimize your CGT, you must accurately calculate your "cost base." This isn't just the purchase price; it includes:

• Stamp duty and legal fees
• Advertising and real estate agent fees for the sale
• Costs of improvements (renovations)
• Maintenance costs that weren't claimed as tax deductions

Strategy for May 2026

As we approach the end of the financial year, timing is everything. If you are close to a contract exchange, consider whether it is more beneficial to have the CGT event fall in the current year (if you have had a low-income year) or the next year.