Capital gains tax and selling property

The Australian Government recently introduced new tax reforms that will change capital gains tax as we know it. Read on to know more about how these can affect investment properties.

What’s new with capital gains tax (CGT) in 2026? 

According to the latest Tax Reform, from 1 July 2027, the Government will impose a cost base indexation or inflation-based discount and a 30% minimum tax rate on capital gains. This will replace the 50% CGT discount for individuals, trusts, and partnerships.The reforms aim to reduce the impact of inflation when calculating taxable capital gains. It will affect all CGT assets held by individuals, partnerships, and trusts for at least 12 months. 

The changes to CGT will only apply to gains accruing after 1 July 2027. If you have existing gains accrued before the implementation date, they won’t be affected according to transition rules. The changes to CGT announced in the 2026-2027 Federal Budget will not apply to Tax Time 2026. 

What is cost base indexation on CGT? 

Indexation will be based on the Consumer Price Index (CPI), which measures household inflation. The goal of this change is to tax real gains and ensure that investment decisions are made based on economic factors and not tax outcomes or changes in purchasing power. 

What is the minimum tax on CGT? 

The minimum tax rate on CGT will be 30% and will apply to real capital gains accruing from 1 July 2027. There will be no impact until the income is realised. Those with CGT already taxed at rates of at least 30% will not be impacted. 

What is capital gains tax? 

Usually, you will make a capital gain or a capital loss when you sell an asset like a property or shares. If your asset grew in value from the day you purchased it to the day you’re selling, the capital gain you received from selling the asset will be taxed. This tax is called capital gains tax. 

In the matter of selling a property, you are required to pay CGT if the property is not considered as your primary home. Any kind of property you own will be taxed whether it is an investment property, vacant land, or a holiday home. 

When capital gains tax may apply

When selling a property, it is important to understand how CGT may apply. The amount of CGT payable, if any, will depend on factors such as the type of property, how it has been used, and how long it has been owned.

Some of the common CGT exemptions, concessions and rules that may apply to you as a property owner are outlined below. 

Main residence exemption 

A property that qualifies as an individual's main residence may be exempt from CGT. In some circumstances, a partial exemption may apply where the property has been used to produce income, such as through renting part of the property, offering short-term accommodation, or operating a business from the premises. 

Temporary absence rule 

Under certain circumstances, a property may continue to be treated as a person's main residence after they move out.

For example, where a property was originally established as a main residence and is later rented out, the owner may be able to continue treating it as their main residence for CGT purposes for a limited period, subject to eligibility requirements.

Timing capital gains and losses 

The timing of a property sale can affect the financial year in which a capital gain or loss is recognised. Capital losses from other investments may also be used to offset capital gains, subject to applicable tax rules. As a result, a taxpayer's overall circumstances in the financial year of sale can influence the amount of CGT payable.

CGT discounts and concessions 

Individuals who hold an eligible investment asset, including an investment property, for more than 12 months may be entitled to a 50% CGT discount on any capital gain. As a result, the length of time a property has been owned can be an important factor when determining the tax outcome on the sale of an investment asset.

Self-managed super funds and property 

Assets acquired before 20 September 1985

Different CGT rules may apply where a property is held within a complying self-managed super fund (SMSF). In some circumstances, SMSFs may be entitled to concessional CGT treatment on eligible assets that have been held for at least 12 months.

CGT generally does not apply to assets you acquired before 20 September 1985. This is also known as pre-CGT assets.

For more information about CGT, check out the ATO’s list of CGT assets and exemptions.

Disclaimer: CGT rules are complex and depend on individual circumstances. This information is general in nature and should not be relied upon as tax or financial advice. Professional advice should be obtained before making decisions based on the potential tax consequences of buying, holding or selling property.

Ready to start saving on your home loan?

Find out in under 2 minutes if you qualify for one of our home loans.

Do I Qualify?