If you’re thinking about selling an investment property, the question most people type into Google first is simple: how much tax will I pay? The answer depends on how much the property has gained, how long you’ve held it, your income, and increasingly, when you sell, because the rules change on 1 July 2027. Here’s the plain-language guide.
How CGT Works Now
When you sell an investment property for more than it cost you, the profit is a capital gain, and it’s taxed as part of your income. There’s no separate CGT rate.
The gain is the sale price, less selling costs, less your cost base. Your cost base generally includes what you paid, stamp duty, legal and conveyancing fees, and certain capital improvements. If you’ve claimed capital works deductions on the building over the years, those reduce your cost base, which increases your gain.
Under the current rules, individuals who have held the property for at least 12 months get a 50 per cent discount on the gain. Only the discounted amount is added to your taxable income and taxed at your marginal rate.
One detail that catches people out: for tax purposes the sale generally happens when you sign the contract, not at settlement. That decides which financial year the gain falls into, and it will matter around July 2027.
A Worked Example
In this example, an investor earning $90,000 sells a property with a $230,000 gain. The 50 per cent discount halves that to $115,000, which is added to their income, pushing much of it into the 37 and 45 per cent brackets. The estimated tax on the gain is about $42,900 including the Medicare levy.
Your numbers will differ, particularly if you’ve claimed depreciation, made improvements, or have capital losses to offset.
What Changes on 1 July 2027
The 2026-27 Budget reforms to capital gains tax are now law. From 1 July 2027, the 50 per cent discount for individuals, trusts and partnerships is replaced with cost base indexation, so you’re taxed on the gain above inflation, together with a 30 per cent minimum tax on capital gains.
For properties you already own, the ATO says the new rules only apply to gains that accrue after 1 July 2027. In practice that means the gain will be split between the old and new systems, and the property’s value around that date is likely to matter. The ATO is expected to issue guidance on exactly how that split is calculated.
Separately, negative gearing changes from 1 July 2027 affect established residential properties bought after 7:30pm on 12 May 2026. Properties held before then keep the current negative gearing rules.
Ways People Legitimately Reduce CGT
Keep every record of your costs, since a larger cost base means a smaller gain. Capital losses from other investments can offset capital gains. Timing a sale into a financial year where your other income is lower can mean the gain is taxed at lower marginal rates. And if the property was once your home, the main residence exemption and the six-year rule may reduce or remove the tax, depending on your history.
With the 2027 changes, timing and records matter more than ever, which is why professional advice before signing a contract is worth it.
Where to Check
The ATO explains the reforms on its page on negative gearing and CGT reform. A registered tax agent can model your specific sale.
The Bottom Line
Selling an investment property usually triggers capital gains tax, currently worked out as the gain less a 50 per cent discount if you’ve held it 12 months, taxed at your marginal rate. In our example, a $230,000 gain costs about $42,900 in tax. From 1 July 2027, the discount is replaced with inflation indexation and a 30 per cent minimum tax, with existing properties keeping the old treatment for gains up to that date. Keep your records, watch your contract date, and get advice before you sign. This is general information, not tax or financial advice.
Epik Wire covers property in plain language for buyers, sellers, owners and investors. Subscribe to our newsletter to stay informed.
