Capital gains tax when selling property in Australia.

The formula.

Capital gain = Sale price − Cost base
Assessable gain = max(0, Gain − Carried losses) × (1 − discount)
CGT payable = Assessable gain × Marginal tax rate

Where discount = 50%if you’re an individual / joint owner / trust holding 12+ months (s115-25), 0% if you’re a company or held under 12 months. Marginal rate is your 2025-26 progressive personal rate (up to 45%) plus 2% Medicare levy — or a flat 30% if held in a company.

Everything else is a refinement of those three lines.

Cost base — the five elements of s110-25.

The cost base is what you subtract from sale price. It’s not just the purchase price. ITAA 1997 s110-25 defines five elements:

In this example cost base is $914,000. On a $1,200,000 sale: gross gain = $286,000. Before any other adjustment, that’s your starting point.

Depreciation recapture: s110-45(2).

Every dollar of Div 43 capital works depreciation you claimed during holding reduces your cost base at sale. So if you claimed $45,000 of Div 43 across 8 years of ownership, your $914,000 cost base drops to $869,000, and the gain becomes $331,000 instead of $286,000.

This sounds punitive but isn’t once you do the math. Those Div 43 deductions saved you (say) 37% × $45,000 = $16,650 in tax during holding. At sale, the $45,000 of recapture goes through the 50% CGT discount and then your marginal rate: $45,000 × 50% × 37% = $8,325. Net saving from claiming Div 43: $16,650 − $8,325 = $8,325 — roughly half of the deferred tax is kept.

Verdict: always claim Div 43 if you can substantiate it (quantity surveyor report is the standard). The recapture at sale is less than the deduction during holding because of the 50% discount.

Main residence exemption (s118-110) — the biggest lever.

If the property was your principal place of residence (PPOR) for the full ownership period, you pay $0 in CGT. The main residence exemption under s118-110 wipes the gain entirely for owner-occupied periods.

If the property was partly PPOR and partly rented, you get a proportional exemption:

Taxable proportion = Rental days / Total ownership days

On a 10-year hold where it was your PPOR for 4 years and rented for 6, the taxable portion is 6/10 = 60% of the otherwise-computed gain. The remaining 40% is exempt.

Rules: only one main residence per household at a time (couples share an exemption unless separated and independently taxed). Land under 2 hectares qualifies — excess land is treated as an investment. You must have actually moved in after purchase to establish it as PPOR.

The 6-year absence rule (s118-145) — the most-missed exemption.

If you move out of your main residence and rent it, you can elect to keep treating it as your main residencefor up to 6 years from the move-out date, as long as you don’t claim a different property as your main residence in the same period.

Example: buy at $600K, live in it for 2 years, move out for work, rent it for 6 years, sell at $1.1M. Without the 6-year rule, 75% of the gain is taxable (6 rental years of 8). With the rule applied, 100% of the 8 years count as PPOR — the entire gain is exempt. On a $500K gain at 37% marginal with the 50% discount, that’s ~$92K of CGT avoided.

The 6-year clock restarts each time you move back in, subject to reasonableness tests. If you rent for longer than 6 years continuously, the portion above 6 years becomes taxable. The rule is an election, not automatic — you have to claim it on your return.

Joint ownership — the cheapest tax planning move.

In joint names (typically 50/50), the capital gain is split evenly and each owner is taxed at their own marginal rate. If one partner is on 45% and the other is on 16%, the combined tax is dramatically lower than single-name ownership at 45%.

Difference: $43,500 saved by joint ownership with a low-income partner, just from how the tax is distributed. This is the structural decision that should be made before purchase — changing ownership after acquisition triggers a CGT event itself (s104-10).

Carry-forward losses (s102-5).

Capital losses from other investments — shares, crypto, failed property — offset capital gains before the 50% discount is applied. So a $60K share loss offsetting a $200K property gain reduces the assessable gain to $140K, then the 50% discount cuts it to $70K.

Losses carry forward indefinitely with no expiry. You can’t offset them against ordinary income (salary, rent, dividends) — only against future capital gains. If you have unused losses and are considering a CGT-triggering sale, this is the year to do it.

The contract date vs settlement date rule.

Critical: the CGT event happens on contract date, not settlement (s104-10). If you sign on 28 June 2026 and settle on 15 August 2026, the gain is assessable in FY25-26 — due with your return lodged in 2026-27.

This matters for:

• 12-month discount threshold — the 12 months are measured contract-to-contract.
• Year-end planning— a sale contracted on 30 June lands in that financial year; 2 July lands in the next. For high-income years where you’d hit 45%, deferring contracts into a lower-income year can save tens of thousands.
• Setting money aside from settlement — compute estimated CGT before settlement so you can ring- fence the cash for the tax bill that lands months later.

When to sell now vs wait.

If you’re within weeks of crossing the 12-month discount boundary, waiting almost always wins. On a $100K gain at 37% marginal, the 50% discount saves $18,500 — far more than any foreseeable price move in 2-4 weeks.

Other timing triggers worth modelling:

• Partner on career break / parental leave (lower marginal rate).
• Year you’re relocating overseas (AU resident for tax but lower other income).
• Year you’re realising a capital loss elsewhere (offset available).
• Pre-retirement year where total income drops permanently.

The short version.

CGT is mechanical. Cost base plus five elements. Subtract accumulated Div 43. Subtract carry-forward losses. Apply 50% discount if held 12+ months. Tax at marginal rate, split by ownership share. Main residence exemption wipes the owner-occupied portion; 6-year absence rule extends it. Joint ownership saves tens of thousands by distributing the gain across rates.

Plan the sale before you list, not during conveyancing. Every decision — sell-now vs wait, single-name vs joint, PPOR-claim vs investor-claim — is worth thousands. Our calculator models all of it so you know the number before an agent knows your name.