Capital Gains Tax on Selling Property in Australia

Many investors are first put off by the high headline rate of Capital Gains Tax (CGT) when they start looking at Australian property, but Australia’s capital gains tax on selling property is not actually as high as it first appears. This article breaks down how Australia’s capital gains tax is calculated, and how to reduce the tax bill.

Australia’s Capital Gains Tax Is Really Just Income Tax

Capital Gains Tax (CGT) is the tax an owner pays on the net profit made from selling an Australian asset (such as a house), and it also covers gains from buying and selling shares. Owners report capital gains and capital losses on their income tax return, and pay tax on their net capital gain. Although it is called “Capital Gains Tax,” in Australia it is actually part of personal income tax rather than a separate tax. If an owner makes a capital gain from selling a property, it increases the income tax payable for that financial year.

Income Tax Rates

Australian income tax rates for 2025-26:

2025-26 personal income tax rates for foreign residents:

If the owner is not an Australian permanent resident or citizen, they are taxed only on income sourced within Australia, such as rental income from an Australian property.

Foreign residents have no tax-free threshold and do not pay the Medicare levy.

How Taxable Income Is Calculated

Sale price − purchase price − acquisition costs − holding costs = taxable income

An owner first calculates the sale price minus the purchase price; if the result is positive, they then deduct legal fees, stamp duty, agent’s commission, property management fees and other costs of acquiring, holding and disposing of the property. The final net amount is the taxable income. The Australian government lists ten categories of deductible costs, including surveying, valuation, accounting, and advertising costs on sale, among others.

Australia ATO — deductible CGT costs

Exemptions and Tax Relief

Australian permanent residents and citizens are entitled to a tax concession when selling Australian property: if the owner has held the property for more than 12 months, they can claim a 50% discount on the taxable income for CGT purposes. The 12-month period is calculated from the date of the contract of sale, not from Settlement Day.

Australia ATO — CGT discount

Related reading:

• Settlement Day: What to Know When Buying Property in Australia

Worked Example and Points to Note

Owners should note that Australia’s tax year runs from 1 July to 30 June the following year, not from March or April. Under Australian tax law, capital gains are combined with the owner’s other income for that year, so the calculation must also include any other Australian-sourced income for the year, such as salary earned from working in Australia, as well as rental income.

Example: Australian Resident

Ms. Lee is an Australian permanent resident. She signed a contract of sale on 11 April 2018 to buy a brand-new property in Melbourne for AUD 300,000, with tax-related acquisition costs of AUD 30,000, and signed a contract to sell it for AUD 400,000 on 15 June 2021. From the time she bought it, she rented it out for AUD 2,000 a month. Ms. Lee’s CGT is calculated as follows:

Taxable income = $400,000 (sale) − $300,000 (purchase) − $30,000 (acquisition costs)

Ms. Lee has held the property for more than 12 months, so the taxable income qualifies for the 50% discount.

Taxable income = $70,000 × 50%

Taxable income = $35,000

Add that year’s rental income: $2,000 × 12 months

Ms. Lee’s total personal taxable income for the 2020-21 year is AUD 59,000.

The actual tax payable is calculated as $5,092 + ($59,000 − $45,000) × 32.5%.

Ms. Lee’s final tax bill is AUD 9,642.

Example: Foreign Resident

If Ms. Lee were instead an overseas owner, her actual taxable amount from selling the Australian property would be $70,000, plus rental income of $24,000. That year’s capital-gains-related taxable income would be $94,000, with tax payable of AUD 30,550.

Some owners therefore choose to sell a property while it is vacant, since a vacancy reduces rental income, and advertising costs incurred to find a tenant can also be deducted from the calculation, thereby reducing the tax bill.

Some Foreign Owners Must Have Tax Withheld When Selling Australian Property

If the seller is a foreign owner — that is, not an Australian company or an Australian permanent resident — the buyer must withhold a percentage of the price and pay it to the Australian government as withholding tax. From 1 January 2025, this withholding rate is 15% of the value of all property sold by a foreign resident; the earlier AUD 750,000 threshold and 12.5% rate applied only to sales completed up to 31 December 2024 and no longer apply. The foreign owner (seller) can then lodge a return with the Australian government and claim a refund.

For example, if Ms. Lee sold her Australian property for AUD 800,000, the buyer would withhold AUD 100,000 (12.5% of the price) when paying, so Ms. Lee would actually receive AUD 700,000, and could then apply to the Australian government for a refund.

Australian government tax concessions vary from year to year, and there are separate capital-gains-tax reductions for sellers of a main residence or those selling to buy another home. We recommend that owners seek professional advice before selling, to avoid paying more tax than necessary and to avoid inadvertently breaching the law.

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