How to Calculate Capital Gains Tax on Property in Australia

Buying your first home is one of life’s biggest milestones, but deciding where to put down roots can feel overwhelming. From property prices and lifestyle choices to long-term growth potential, choosing the right location is just as important as finding the right house.

For those planning ahead—whether to live in or as an investment, understanding how to calculate capital gains tax Australia is another key consideration when it comes to property decisions. In 2025, one region stands out as a top choice for first-time buyers, the South Coast. With its natural beauty, thriving communities, and relative affordability, the South Coast offers the perfect balance between modern living and smart investment potential.

In this article, we’ll explore why the South Coast is quickly becoming the go-to destination for first-home buyers this year.

What is Capital Gains Tax?

Capital Gains Tax is the tax you pay on the profit from selling certain assets, such as real estate, shares, or managed funds. In Australia, CGT isn’t a separate tax. Instead, your capital gain is added to your assessable income and taxed at your marginal tax rate.

For property sales, CGT applies unless an exemption or concession is available.

When Does CGT Apply to Property?

You may have to pay CGT if you sell:

• An investment property (e.g., rental property or holiday home).
• A vacant block of land.
• A property you inherited, depending on the circumstances.

However, CGT does not usually apply if:

• The property was your main residence (home exemption) for the entire ownership period.
• You acquired the property before 20 September 1985 (pre-CGT assets).
• You qualify for certain special exemptions or concessions.

How to Calculate Capital Gains Tax on Property

Calculating CGT involves a few steps:

Work Out the Capital Proceeds

This is the amount you received from selling the property. Usually, it’s the sale price minus selling costs such as:

• Agent’s commission
• Advertising fees
• Legal fees

Determine the Cost Base

The cost base is essentially what you spent to acquire and hold the property. It can include:

• Purchase price
• Stamp duty
• Legal fees and conveyancing costs
• Renovation and improvement expenses (capital works, not maintenance)
• Holding costs like interest and council rates (only if the property wasn’t income-producing)

Calculate the Capital Gain (or Loss)

The formula is:

Capital Gain = Capital Proceeds – Cost Base

• If the result is positive, you’ve made a gain.
• If negative, you’ve made a capital loss which you can use to offset other capital gains.

Apply CGT Discount or Exemptions

• 50% CGT discount: If you’re an individual and have held the property for more than 12 months, you can reduce the capital gain by 50%.
• 3% discount: Applies to superannuation funds.
• Main residence exemption: If the property was your home the whole time, no CGT applies. If only part of the time, a partial exemption applies.

Report the Net Capital Gain

Your final net capital gain (after discounts and exemptions) is added to your taxable income for the year. You then pay tax according to your personal marginal rate.

Tips to Reduce Your CGT on Property

• Time the sale carefully: If your income will be lower in a certain financial year, selling then may reduce your tax liability.
• Keep detailed records: Holding all receipts and invoices for purchase and improvement costs can significantly increase your cost base and reduce CGT.
• Consider the main residence exemption: If you lived in the property before renting it out, you may qualify for a partial exemption.
• Offset with capital losses: Losses from other investments can be used to reduce your taxable gain.

Final Thoughts

Calculating Capital Gains Tax on property in Australia involves understanding your cost base, sale proceeds, and eligibility for exemptions or discounts. While the main residence exemption helps many homeowners avoid CGT altogether, investors should plan ahead to minimise their tax burden.

Because property transactions can be complex, it’s always best to seek advice from a qualified accountant or tax advisor. They can help ensure your calculation is correct and that you’re making the most of available concessions.