What is capital gains tax on property?
Capital gains tax (CGT) is not a separate tax — it's the inclusion of a capital gain in your assessable income for the year you dispose of an asset. For property, a CGT event is triggered when you sell (dispose of) the property. Holding a property, renting it, or receiving rental income does not trigger CGT. Only the disposal event does.
How is CGT calculated on investment property?
The basic formula: capital gain = sale proceeds − cost base. The cost base includes the original purchase price plus acquisition costs (stamp duty, conveyancing), capital improvements made over the holding period, and some selling costs. The resulting gain is added to your taxable income for that financial year.
The 50% CGT discount
If you're an individual or trust that has held the property for more than 12 months before disposal, you're entitled to a 50% discount on the capital gain. This means only half the gain is added to your taxable income. Companies are not entitled to this discount. Superannuation funds get a one-third discount. This is one of the most significant concessions in the Australian tax system — and timing your sale to qualify matters.
Inherited property and CGT
Inheriting a property doesn't trigger CGT at the time of inheritance. The CGT event occurs when you eventually sell. For properties inherited from estates where the deceased acquired the property before 20 September 1985 (pre-CGT), the cost base is reset to the market value at date of death. For properties acquired post-CGT, the estate's cost base carries through. Either way, inheritance doesn't defer CGT indefinitely — it just moves the event to the eventual sale.
The main residence exemption — and when it doesn't apply
Your principal place of residence is generally exempt from CGT. But that exemption erodes or disappears if: the property was rented at any point (partial apportionment applies), you have more than one residence, or you've used the "absent from main residence" rule for more than 6 years. Investment properties are not your main residence and receive no main residence exemption.
The exit tax reality for investment property owners
For long-held investment properties, the CGT bill on exit can be significant. Example: property purchased in 2005 for $350,000, sold in 2026 for $900,000. Capital gain: $550,000 less cost base adjustments. After 50% discount: ~$275,000 added to taxable income. At a 47% marginal rate, that's roughly $129,000 in CGT. This doesn't mean selling is wrong — but the tax impact needs to be modelled before making the decision.
Eleva's income model lets you earn from your property without triggering a CGT sale event.
See how the income model works →Keeping the property to avoid CGT
If the goal is to generate wealth from the asset without triggering CGT, the answer is simple: don't sell. Rental income is assessable but CGT is not triggered. A managed income model — particularly one that maximises gross income from the existing property — can deliver better after-tax outcomes than selling and reinvesting the CGT-reduced proceeds elsewhere.