Capital Gains Tax on Property: What Sellers Should Know

1. Introduction

Buying a property feels exciting.
Selling one… can feel like winning the lottery — until the tax bill lands in your inbox.

If you’re selling a property in Australia, Capital Gains Tax (CGT) is something you can’t afford to ignore.

The good news?
There are ways to reduce or even eliminate CGT.

The bad news?
Most sellers only find out after they’ve already made costly mistakes.

Let’s break it down properly — so you sell smarter, not sorrier.

2. What is Capital Gains Tax (CGT)?

Capital Gains Tax is the tax you pay on the profit you make when you sell a property (or any asset).

The ATO doesn’t call it a separate tax — CGT is just part of your income tax. But it can significantly bump up your tax bill for the year you sell.

If you make a gain, it’s added to your taxable income.
If you make a loss, you can carry it forward to offset future capital gains.

3. How is CGT Calculated on Property?

It’s simpler than it sounds (at least on paper):

Capital Gain = Sale Price – Cost Base

Where:

• Sale Price = What you sell the property for (after selling costs like agent commission).
• Cost Base = What you paid for the property + buying costs (stamp duty, legal fees) + significant improvements (like renovations).

Example:

• Bought for $600,000
• Selling for $800,000
• Buying/selling costs and improvements = $50,000
• Capital Gain = $800,000 – ($600,000 + $50,000) = $150,000

You then add that $150,000 to your taxable income… unless you qualify for discounts or exemptions.

4. CGT Exemptions and Discounts

Main Residence Exemption:
If the property was your primary home for the entire ownership period, you might be fully exempt from CGT.

50% CGT Discount:
If you’ve held the property for more than 12 months, you generally qualify for a 50% discount on the gain.

Using the earlier example:

• $150,000 gain
• Apply 50% discount → $75,000 taxable capital gain
• $75,000 is added to your taxable income for that financial year.

Partial Exemptions:
If you lived in the property part-time and rented it out part-time, you may qualify for a partial exemption.

5. Common Traps Sellers Fall Into

1. Forgetting Improvements in Cost Base
If you spent money on renovations (kitchen upgrades, extensions), those costs increase your cost base — reducing your CGT. Many sellers forget to include these and overpay tax.

2. Selling Too Soon
Selling before 12 months means you miss out on the 50% CGT discount. Timing matters.

3. Assuming Full Exemption
If you rented out your home even for a short time, full exemption may not apply. Be careful.

4. Poor Record Keeping
Lost receipts = lost deductions = higher tax bill.

6. How to Minimise CGT When Selling

✅ Keep Detailed Records
Every dollar you spend buying, improving, and selling can potentially reduce your CGT.

✅ Time Your Sale
Holding for at least 12 months can halve your taxable gain.

✅ Seek Professional Tax Advice
A good accountant can save you far more than they cost.

✅ Use Tools to Model Sale Scenarios
Knowing your likely gain (and your next steps) helps you make smarter selling decisions.

7. How Property Dollar Helps Sellers Stay Ahead

Selling strategically isn’t just about timing — it’s about knowing your numbers before you commit.

With Property Dollar, you can:

• Track your property’s value in real time.
• Forecast potential capital gains based on live market data.
• Plan sale scenarios, including estimated loan payouts and net proceeds.
• Optimise your loan exit strategy for maximum financial benefit.

Download Property Dollar here to plan your next move like a pro — not just hope for the best.

8. Conclusion

Capital Gains Tax can feel complicated.
But it doesn’t have to be painful.

By understanding how CGT works — and planning your sale with eyes wide open — you can keep more of your hard-earned gains in your own pocket.

Start early.
Run the numbers.
Use the right tools.

Download the Property Dollar app now and take control of your next property move.

Because a great sale deserves a smart finish.