How to Minimise CGT When Selling an Investment Property

How to Minimise CGT When Selling an Investment Property

What if the difference between a $90,000 CGT bill and a $35,000 CGT bill on the same property sale is nothing more than planning? For a property with a $400,000 gain, the strategies in this guide routinely halve the tax bill. They're legal, established, and available to every investor. And right now, for the first time in decades, there's a hard deadline that makes timing decisions more consequential than usual. This guide explains how CGT works on investment property, the seven key strategies available in 2026, and what the announced 2027 changes mean for your planning decisions.

For a property bought in 2015 and sold in 2026 with a $400,000 capital gain, the tax bill without planning could exceed $90,000. With proper strategies in place, the same transaction can result in a significantly lower bill, sometimes less than half that amount.

The strategies that reduce capital gains tax on investment property in Australia are legal, well-established, and available to every investor. The difference between those who use them and those who do not is usually professional advice and early planning.

TL;DR: The 7 CGT Strategies That Make the Biggest Difference

• Hold for more than 12 months to access the 50% CGT discount (under current law until 30 June 2027)

• Maximise your cost base by including all eligible purchase, holding, and sale costs

• Time the sale to align with lower-income years, before 1 July 2027, or across two financial years

• Use the 6-year main residence rule if the property was previously your home

• Offset capital gains with capital losses from other investments in the same financial year

• Contribute to super in the year of sale to reduce taxable income

• Understand the 2026 Budget changes and how transitional rules protect gains accrued before 1 July 2027

• If you're planning to sell in the next 12 to 24 months, the 1 July 2027 Budget deadline makes timing decisions more consequential than at any point in recent history. Get professional advice before acting.

Bottom line: CGT minimisation on investment property is not a last-minute task. The strategies that produce the biggest savings require planning months or years before the sale.

Jump to a Strategy

• How Does CGT Work on Investment Property in Australia?

• Strategy 1: Maximise Your Cost Base

• Strategy 2: Hold for More Than 12 Months

• Strategy 3: Time the Sale Strategically

• Strategy 4: Use the 6-Year Main Residence Rule

• Strategy 5: Offset Capital Gains with Capital Losses

• Strategy 6: Contribute to Super to Reduce Taxable Income

• Strategy 7: Consider the Partial Main Residence Exemption

• How Do the 2026 Budget Changes Affect CGT on Investment Property?

• Two Australian Property CGT Examples

• Common Mistakes Property Investors Make

• FAQ

• Ready to Plan Your Property Sale Properly?

How Does CGT Work on Investment Property in Australia?

When you sell an investment property for more than you paid for it, the profit is a capital gain. That gain is added to your taxable income for the year and taxed at your marginal rate.

The basic calculation:

• Capital proceeds (sale price minus selling costs)

• Less cost base (purchase price plus eligible costs)

• Equals gross capital gain

• Less 50% CGT discount if held over 12 months (under current law)

• Equals net capital gain, added to taxable income

For a property sold in 2025-26 with a gross capital gain of $300,000, held for more than 12 months:

• Apply 50% discount: taxable gain reduces to $150,000

• Added to other income of $120,000: total taxable income of $270,000

• Tax payable on the $150,000 gain at marginal rates: approximately $55,500

Without the 50% discount (if sold within 12 months), the tax would be approximately $111,000 on the full $300,000 gain. The 12-month holding period saves $55,500 on a single transaction.

Bottom line: The 50% CGT discount is the single most valuable CGT strategy available to Australian property investors under current law. Every other strategy builds on top of it.

Strategy 1: Maximise Your Cost Base

The cost base is the starting point for calculating your capital gain. Every dollar added to the cost base reduces the gain dollar for dollar. Most investors significantly underestimate their cost base by failing to include all eligible expenses.

Most investors underestimate their cost base by 15 to 30% because they don't know all the eligible categories. Here's what actually counts:

Two categories commonly assumed to increase the cost base but that don't:

• Expenses already claimed as tax deductions (loan interest, depreciation, maintenance)

• The cost of repairs and maintenance that were deducted in prior years

Many investors miss capital improvement costs accumulated over years of ownership. A kitchen renovation in 2018 for $35,000, for example, increases the cost base and reduces the capital gain by exactly that amount.

What if the kitchen renovation you paid for in 2019 is sitting in a shoebox of receipts, unclaimed, quietly inflating your eventual CGT bill? Cost base records are one of the highest-return administrative habits an investor can develop, and most investors only discover their gaps when they're about to sell.

Bottom line: Keeping meticulous records of every cost associated with the property from purchase to sale is one of the highest-return administrative habits an investor can develop.

Strategy 2: Hold for More Than 12 Months

Selling before 12 months of ownership means the full gross capital gain is taxable. Selling after 12 months allows the 50% CGT discount, halving the taxable gain.

This is the most straightforward and powerful CGT strategy, but it requires planning at the point of purchase rather than the point of sale.

For a property with a $250,000 capital gain:

• Sold before 12 months: Taxable gain of $250,000

• Sold after 12 months: Taxable gain of $125,000

At a 47% marginal rate, the difference in tax is approximately $58,750 on a single property. The case for holding beyond 12 months is overwhelming in almost every scenario.

Bottom line: Never sell an investment property before 12 months of ownership. The tax cost almost always outweighs any benefit from selling early.

Strategy 3: Time the Sale Strategically

When you sell matters as much as whether you sell. Timing the settlement date strategically can reduce the CGT bill in several ways.

Sell in a Lower-Income Year

CGT is added to your taxable income for the year of sale. Selling in a year when your other income is lower reduces the marginal rate applied to the gain.

The most common situations that create a lower-income year, and therefore a better CGT outcome, are:

• Taking parental leave or reducing work hours

• The year of retirement before super drawdowns begin

• Sabbaticals or career breaks

• Years of significant deductible expenses that reduce net income

A $150,000 taxable gain added to an income of $50,000 is taxed very differently from the same gain added to an income of $200,000.

Straddle Two Financial Years

Settlement timing can split a large capital gain across two financial years. If you exchange contracts in June and settle in July, the gain typically falls in the July financial year, giving you more time to plan and potentially spreading some tax across two periods.

Note: the CGT event generally occurs at the date of contract exchange, not settlement. Always confirm timing with your accountant before structuring around this.

Sell Before 1 July 2027

Sell before 1 July 2027 if the announced Budget changes proceed. The 2026 Budget has announced that from 1 July 2027, the 50% CGT discount will be replaced with cost base indexation and a 30% minimum tax on real capital gains. These changes are announced but not yet legislated.

Under the transitional rules, gains accrued before 1 July 2027 are protected and continue to receive the 50% CGT discount treatment. Gains accruing after 1 July 2027 fall under the new regime.

For investors with large unrealised gains, selling before 1 July 2027 crystallises the full gain under the existing 50% discount rules. This may produce a better outcome than holding, depending on:

• The size of the gain accrued to date

• The expected growth between now and sale

• The investor's marginal tax rate

• Whether the property is a new build (which gets choice of either regime)

Do not make irreversible decisions based on announced but unlegislated changes alone. Seek specific professional advice before acting.

Bottom line: Timing the sale to align with a lower-income year, across two financial years, or before 1 July 2027 (if the changes proceed) can produce significant tax savings on the same transaction.

Weighing up whether to sell before 1 July 2027 or hold longer? WIAA's registered tax agents can model both scenarios for your specific property, income, and gain. Single-issue CGT modelling typically starts at $1,500. Book a free 15-min scoping chat, phone 1800 942 843, or email tax@whatifadvice.com.au. 

Strategy 4: Use the 6-Year Main Residence Rule

If an investment property was previously your primary place of residence (PPOR), you may be able to apply the 6-year main residence rule to reduce or eliminate CGT on sale.

How it works:

• If you move out of your home and rent it out, you can continue to treat it as your PPOR for CGT purposes for up to 6 years of rental that can be sheltered from CGT

• During this period, any capital gain accrued while renting it out is exempt from CGT

• The rule resets each time you move back in and then move out again

• You cannot have another property nominated as your PPOR during the same period

For a property that was your home for 2 years, then rented for 4 years, then sold:

• If sold within 6 years of moving out: the full gain may be CGT-free

• If held longer than 6 years: a partial exemption applies based on the proportion of time it was your PPOR

This rule is entirely unchanged by the 2026 Budget. The main residence CGT exemption is fully preserved.

What if you lived in your investment property for 18 months before renting it out and you've never heard of the 6-year rule? You may be entitled to claim years of rental gain as CGT-exempt. It's one of the most underused and most valuable strategies in the entire CGT framework.

Bottom line: The 6-year rule is one of the most valuable and underused CGT strategies for investors who have previously lived in their investment property.

Strategy 5: Offset Capital Gains with Capital Losses

Capital losses from other investments can be offset against capital gains from property in the same financial year. Unused capital losses can be carried forward indefinitely to offset future gains.

Capital losses from other asset classes can directly offset property gains. The most common sources for Australian investors are:

• Shares or ETFs sold at a loss

• Cryptocurrency sold at a loss

• Managed fund units redeemed below cost

The offset is applied before the 50% CGT discount, which means the full capital loss reduces the full gross gain before discounting.

For a property with a $300,000 gross gain and $80,000 of carried-forward capital losses from prior share sales:

• Gross gain: $300,000

• Less carried-forward losses: $80,000

• Net gain before discount: $220,000

• After 50% discount: taxable gain of $110,000 (versus $150,000 without the offset)

Bottom line: Review your portfolio for available capital losses before selling an investment property. Timing the crystallisation of a loss in the same year as a property sale can save thousands.

Strategy 6: Contribute to Super to Reduce Taxable Income

Making personal deductible super contributions in the year of sale reduces your taxable income, which can reduce the marginal rate applied to the capital gain or keep more of the gain in lower brackets.

How it works:

• The concessional contributions cap is $30,000 in 2025-26 (rising to $32,500 from 1 July 2026)

• Personal deductible contributions reduce your assessable income dollar for dollar

• The contributions are taxed at 15% inside super rather than your marginal rate

• Carry-forward concessional contributions may allow significantly more in a single year if your balance is below $500,000

For a higher-income investor selling a property and expecting a large capital gain, maximising the concessional cap in the year of sale reduces net taxable income and can lower the effective tax rate on the gain.

Bottom line: Maximising super contributions in the year of a property sale is one of the most practical ways to reduce the marginal rate applied to the capital gain.

Strategy 7: Consider the Partial Main Residence Exemption

If an investment property was your home for part of the ownership period and a rental for the rest, a partial CGT exemption applies. The exempt portion is calculated based on the days it was your PPOR relative to the total days of ownership.

Formula: Exempt portion = Days as PPOR divided by total ownership days, multiplied by total capital gain. The remaining portion is taxable (with the 50% discount available if held over 12 months).

For a property owned for 3,000 days, of which 600 days were lived in as a PPOR:

• 600 divided by 3,000 = 20% exempt

• 80% of the gain is taxable

• The 50% discount then applies to the taxable 80%

Where the 6-year rule applies during the rental period, more of the gain can be sheltered.

Bottom line: Many investors who briefly lived in an investment property miss the partial main residence exemption entirely. It requires careful calculation and documentation but can produce meaningful tax savings.

How Do the 2026 Budget Changes Affect CGT on Investment Property?

The 2026-27 Federal Budget announced significant CGT reforms that affect investment property investors. All announced measures are not yet legislated.

The government has confirmed the following transitional arrangements. These details may change before the legislation passes:

• Gains accrued before 1 July 2027 retain the 50% CGT discount treatment regardless of when the property is sold

• Assets acquired before 1 July 2027 and sold after will have the gain apportioned between pre and post-2027 periods

• The 30% minimum tax is designed to prevent timing sales into low-income years. Investors already in the 30%+ bracket are largely unaffected on that measure

Do not make irreversible structural or selling decisions based solely on announced but unlegislated changes. The details will shift as legislation is drafted and consulted on.

Bottom line: For most established property investors, the case for reviewing the timing of planned sales before 1 July 2027 is stronger than it has been at any point in recent history. Professional advice is essential before acting.

What Should You Actually Do Now?

Scenario A: You're planning to sell in the next 12 months. The Budget changes don't materially affect you. Gains accrued to date are protected under transitional rules regardless. Focus on cost base maximisation, income timing, and financial year settlement strategy.

Scenario B: You're planning to sell in the next 1 to 3 years. The 1 July 2027 deadline is relevant to your decision. Get professional modelling of both scenarios: selling before 1 July 2027 under current rules versus selling after under the new regime. The answer depends on your specific gain size, income, and growth projections.

Scenario C: You're holding long-term (5+ years). The changes alter the future tax environment but don't require immediate action. Ensure your cost base records are complete and up to date. Review your position when the legislation is passed and the details are confirmed.

All three scenarios benefit from specific professional advice. The right move depends on your individual property, income profile, and financial position.

Not sure which scenario applies to you? WIAA's team has been modelling client property positions against the 2027 deadline since Budget night. Book a free 15-min chat to scope your specific situation. Phone 1800 942 843 or email tax@whatifadvice.com.au.

Two Australian Property CGT Examples

Example 1: Sarah, 42, Selling a Brisbane Investment Property

Sarah bought an investment property in Brisbane in July 2018 for $520,000 and is selling in April 2026 for $780,000. Her other income is $95,000.

Her CGT calculation:

• Gross capital gain: $780,000 minus $520,000 = $260,000

• Plus eligible cost base additions (stamp duty $22,000, legal fees $2,500, renovation in 2021 of $38,000, selling costs $15,600): total cost base = $598,100

• Revised gross gain: $780,000 minus $598,100 = $181,900

• After 50% CGT discount: taxable gain = $90,950

• Added to income of $95,000: total taxable income = $185,950

• Tax on the $90,950 gain at blended marginal rates: approximately $28,600

Without the cost base additions and discount: tax would have been approximately $94,000. The combination of cost base maximisation and the 50% discount saves Sarah approximately $65,400.

Example 2: Robert and Helen, Pre-Retirees Planning a Sale Before 1 July 2027

Robert and Helen own an investment unit purchased in 2010 for $380,000, now valued at approximately $820,000. Robert earns $165,000 and Helen earns $45,000. They are planning to retire in 2028 and were not intending to sell the unit for several years.

Their analysis in light of the 2026 Budget changes:

• Current unrealised gain: $440,000 (before cost base additions)

• After 50% discount: taxable gain of approximately $180,000

• At current tax rates with income splitting (Helen as joint owner): total CGT of approximately $47,000

• If they wait until 2029 and the announced changes proceed: 30% minimum tax on the indexed gain, potentially with less effective income splitting options

They engage their financial planner and accountant to model both scenarios. The analysis confirms that selling before 1 July 2027 and reinvesting proceeds produces a materially better after-tax outcome in their specific situation. They plan the sale for February 2027, giving time to prepare and settle before the deadline.

Note: Robert and Helen made this decision with specific professional modelling of both scenarios. They did not act based on the Budget announcement alone.

Common Mistakes Property Investors Make

Not keeping records of capital improvements. Every renovation, extension, and major improvement increases the cost base and reduces the gain. Without receipts, these amounts are lost.

Selling within 12 months. The 50% CGT discount is the most valuable single strategy available. Selling before 12 months almost never makes financial sense once the tax cost is factored in.

Ignoring the 6-year main residence rule. Many investors who lived in their property before renting it out are unaware that up to 6 years of rental can be sheltered from CGT.

Not offsetting available capital losses. Carried-forward capital losses from shares or other assets can dramatically reduce the taxable gain. Many investors forget these exist until well after settlement.

Settling in the wrong financial year. The difference between a June and July settlement can shift a large capital gain across two financial years, producing a meaningful tax saving with no other change to the transaction.

Making irreversible decisions based on announced but unlegislated changes. The 2026 Budget CGT changes are significant but not yet law. Selling a long-held property purely in response to an announcement, without professional modelling of both scenarios, is premature.

Treating CGT planning as a post-sale exercise. The most valuable CGT strategies, including holding period, cost base records, and income timing, require planning before the sale, not after.

FAQ

How do I calculate capital gains tax on an investment property? The gross capital gain is the sale proceeds minus the cost base. If the property was held for more than 12 months, the 50% CGT discount reduces the taxable gain by half. The net taxable gain is then added to your other income and taxed at your marginal rate (subject to current ATO rules).

What can I include in the cost base of an investment property? The cost base includes the purchase price, stamp duty, legal and conveyancing fees, capital improvement costs, pest and building inspection fees, and selling costs such as agent commission and legal fees. Costs that were previously claimed as tax deductions cannot be included.

Can I still use the 6-year CGT rule on my investment property? Yes. The main residence exemption and the 6-year rule are fully unchanged by the 2026 Budget. Selling your primary home remains CGT-free and the 6-year rule continues to apply to former homes rented out as investments.

Is the 50% CGT discount being removed? The 2026-27 Budget has announced that the 50% CGT discount will be replaced by cost base indexation and a 30% minimum tax from 1 July 2027. These changes are announced but not yet legislated. Gains accrued before 1 July 2027 are protected under transitional provisions.

Should I sell my investment property before 1 July 2027? This depends entirely on your specific situation, including the size of your unrealised gain, your income in the year of sale, and your longer-term investment strategy. Do not make this decision based on the Budget announcement alone. Seek specific professional modelling of both scenarios before acting.

Can I reduce CGT by transferring the property to my spouse? Transferring property between spouses is generally treated as a CGT event at market value, which can trigger CGT rather than defer it. There are specific circumstances where transfer is effective for estate planning, but this strategy requires careful professional advice. Do not assume it works as a simple CGT reduction tool.

How does negative gearing interact with CGT? Negative gearing deductions reduce taxable income during the ownership period. However, the cost base must be reduced by any building depreciation or capital works deductions claimed, which can increase the eventual capital gain. The interaction between negative gearing and CGT requires careful tracking throughout the ownership period.

How much CGT will I pay on my investment property? It depends on the size of your gain, how long you've held the property, your other income in the year of sale, and what cost base deductions you can claim. For a rough estimate, take your gross gain, apply the 50% discount if held over 12 months, and then look at what marginal rate applies to the resulting amount on top of your other income. A registered tax agent can produce an accurate calculation for your specific situation.

Can I avoid CGT on an investment property in Australia? Not entirely, in most cases. The 50% CGT discount halves the taxable gain for properties held over 12 months. The 6-year rule can eliminate CGT if the property was previously your home and was rented for less than 6 years. Capital losses can reduce the gain further. But for most investment properties with genuine capital growth, some CGT will be payable.

Ready to Plan Your Property Sale Properly?

CGT minimisation on investment property is one of the highest-value services a financial planner and registered tax agent provide. For a property with a $300,000+ gain, professional advice typically saves multiples of its cost.

Three ways to start the conversation:

• Free 15-minute phone or video chat to discuss your property's position and what strategies are available before you sell. Call 1800 942 843 or book online.

• Email the tax team at tax@whatifadvice.com.au for a specific question on cost base, timing, the 6-year rule, or the 2027 changes.

• Single-issue CGT advice from $1,500 for a modelled scenario comparison of your specific sale, including both pre and post-2027 scenarios where relevant.

Still asking what if about your investment property's tax position? Let's run the numbers before you sell.

WIAA combines registered tax agents and AFSL-licensed financial advisers under one roof. Offices in Brisbane and Melbourne, virtual nationwide. AFSL 528250.

General Advice Disclaimer: This information is general in nature and does not take into account your personal financial situation, needs, or objectives. You should consider whether it is appropriate for you and seek personal financial advice before making any decisions. The 2026-27 Budget measures discussed in this article are announced but not yet legislated. Rules change and you should verify current measures and seek specific professional advice before making any decisions about selling investment property. What If Advice is an Authorised Representative under Beryllium Advisers Pty Ltd, AFSL 528250.