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Selling a property for more than its cost can create a capital gain and a potential tax liability. The good news is that there are legitimate ways to reduce capital gains tax on property, depending on how you used the property, how long you owned it, your eligible costs and your overall tax position.
However, CGT is not calculated simply by subtracting the purchase price from the sale price. The property’s ownership history, main residence status, capital improvements, previous losses and other factors can all affect the final result.
If you’re planning to sell, understanding the rules before signing the contract can help you avoid unnecessary tax and make better-informed decisions.
Capital Gains Tax (CGT) is not a separate tax charged at a fixed percentage. Instead, your net capital gain is generally included in your assessable income and taxed according to the applicable rules.
A simplified calculation starts with:
Capital proceeds − cost base = capital gain
For example, if a property sells for $900,000 and its adjusted cost base is $700,000, the initial capital gain would be $200,000 before considering any available discounts, exemptions or capital losses.
If you’re selling an investment property, a property investment accountant perth can review the property’s history and potential CGT position before the sale.
The amount of tax you ultimately pay depends on factors such as your taxable income, ownership structure, available capital losses, CGT concessions and whether an exemption applies.
The cost base can include eligible costs associated with:
Not every expense automatically forms part of the cost base. Some expenses may instead have been claimed as deductions during the property’s ownership.
For more information about expenses associated with owning a rental property, see our Investment Property Tax Deductions Perth guide.
A Simple Example
Suppose a property has:
The simplified capital gain would be:
$900,000 − $700,000 = $200,000
The $200,000 is the capital gain – not the amount of tax payable.
The final taxable amount can be affected by the CGT discount, capital losses and exemptions.
For a standard property sale, the CGT Events generally happens when you enter into the sale contract, rather than when settlement occurs.
This can be particularly important when a contract is signed close to the end of the financial year because the capital gain may belong to the income year in which the contract was entered into.
If you’re considering delaying or bringing forward a sale for tax reasons, professional advice should be obtained before making the decision.
There isn’t one strategy that works for every property owner. However, the following approaches may help reduce capital gains tax on property where the relevant requirements are met.
Your main residence may qualify for a full or partial CGT exemption.
If you lived in the property as your home for the entire ownership period and it was not used to produce assessable income, the main residence exemption may significantly reduce or eliminate the capital gain.
The position can change if you rented the property out, used part of it for income-producing purposes or had another property treated as your main residence.
If you move out of your main residence and rent it out, you may be able to continue treating it as your main residence for CGT purposes for up to six years while it produces income, subject to the relevant conditions.
This is commonly known as the 6-year rule.
However, you generally cannot treat another property as your main residence for the same period, apart from specific circumstances.
The ATO’s main residence rules should be checked before relying on this exemption.
Under the current rules applying in 2026, eligible individuals and trusts may generally receive a 50% CGT discount when an eligible asset has been held for at least 12 months.
The discount is generally applied after capital losses have been taken into account.
However, property owners should be aware that major changes begin from 1 July 2027, which could affect the treatment of future capital gains.
Capital losses from other investments may be used to reduce capital gains, subject to the relevant rules.
For example, a carried-forward capital loss from shares may potentially reduce a capital gain made when selling an investment property.
Capital losses generally cannot be deducted from ordinary income such as salary.
If you have previous capital losses, make sure they are considered before finalising your CGT calculation.
One of the simplest ways to reduce a capital gain is to make sure all eligible costs have been properly identified.
Review:
Keep supporting documentation for these costs. Missing records can make it difficult to establish the correct cost base years later.
Renovations and improvements may affect the cost base when the relevant requirements are satisfied.
Examples can include:
Don’t rely on estimates if the work was completed many years ago. Keep invoices, contracts and other evidence wherever possible.
The timing of a property sale can affect the financial year in which the capital gain is recognised.
It may therefore be worth considering your expected taxable income, available losses and other circumstances before deciding when to sell.
However, selling or delaying a property sale purely to obtain a tax advantage may not make financial sense. Property prices, interest costs and your wider investment objectives should also be considered.
The tax outcome can differ depending on whether a property is owned personally, through a trust, company or another structure.
Changing ownership shortly before a sale is not a simple way to avoid CGT. The transfer itself can have tax, stamp duty and other consequences.
Ownership structure should ideally be considered before purchasing the property, rather than immediately before selling it.
This is one of the most complicated areas for property owners.
For example, imagine you:
The CGT calculation may require consideration of the main residence exemption, the 6-year rule, the period the property produced income and whether another property was treated as your main residence.
Working out how to reduce capital gains tax on property in this situation requires looking at the property’s entire ownership history rather than applying a single rule.
This is an important consideration for investment-property owners.
Previous deductions, including certain depreciation and capital works deductions, may affect the eventual CGT calculation or the property’s cost base.
This means you should review previous tax returns and property records before calculating the expected gain.
Simply using the original purchase price and expected sale price may produce an inaccurate estimate.
This is one of the most important updates for property investors in 2026.
From 1 July 2027, the current 50% CGT discount is being replaced by an inflation-based cost-base indexation system for relevant assets held for more than 12 months, together with a 30% minimum tax rate on net capital gains. The changes were legislated in 2026.
The changes include transitional rules. Gains that arise before 1 July 2027 retain the existing 50% discount treatment, while gains arising from 1 July 2027 are subject to the new framework. Investors in eligible new residential builds will have an option between the existing 50% discount and the new indexation/minimum-tax approach.
This makes the timing and history of an investment particularly important for anyone planning a sale around 2027.
Property owners should obtain individual advice rather than assuming that the current CGT calculation will apply unchanged to a future sale.
Australian tax residents who own property overseas may have additional CGT and foreign-tax considerations.
The rules can differ depending on your tax residency, the location of the property, ownership structure and whether foreign tax has been paid.
For information specifically covering this situation, see our Capital Gains Tax on Foreign Property Australia guide.
Moving overseas does not automatically remove Australian tax obligations associated with Australian property.
Foreign resident capital gains withholding can also apply to certain Australian property transactions.
For contracts entered into on or after 1 January 2025, the withholding rate is 15%, and the previous $750,000 threshold was removed. Australian residents generally need a valid clearance certificate to avoid an amount being withheld from the sale proceeds.
These rules remain relevant for property sales in 2026.
If you’re living overseas, our Australian Expat Tax Return Guide can help you understand broader Australian tax considerations.
Before signing the sale contract, gather:
Having these records ready can make the CGT calculation much easier and help identify eligible costs that might otherwise be missed.
Ideally, before signing the sale contract.
A pre-sale review can help identify:
If you’re unsure about your position, a tax accountant perth can assess the potential tax consequences before you commit to the sale.
Knowing how to reduce capital gains tax on property is primarily about getting the fundamentals right – keeping accurate records, understanding how the property was used, identifying eligible costs and applying the concessions that genuinely apply to your circumstances.
The earlier you review your position, the more opportunity you may have to identify potential issues before the sale is locked in.
For property owners planning to sell in Perth, professional advice before signing the contract can provide a clearer picture of the likely tax outcome and help avoid unexpected liabilities.
Selling Property in Perth?
Don’t wait until settlement to discover your potential CGT liability.
Our team can review your property’s history, ownership structure, records and relevant CGT considerations to help you understand your position before selling.
Get your CGT position reviewed before signing the sale contract.
