How to Calculate Capital Gains Tax on Property in 2025-26

What Is Capital Gains Tax on Property?

Capital Gains Tax (CGT) is not a separate tax – it’s the tax you pay on the profit you make when you sell a property that isn’t your main residence. The gain is added to your assessable income for the year you sell, and you pay tax at your marginal rate.

In 2025-26, the rules remain largely unchanged, but with the Stage 3 tax cuts (from 1 July 2024) still in effect, the tax brackets are different from previous years. That means your CGT bill could be lower or higher depending on your total income.

When Do You Pay CGT on Property?

You generally pay CGT when you sell or dispose of a property that:

• Is an investment property (rental or holiday home)
• Is a vacant block of land
• Was your main residence but you used part of it for business (e.g., home office)
• Was your main residence but the land is more than 2 hectares

You do not pay CGT on your main residence (the home you live in) – that’s covered by the main residence exemption. But if you rented it out at any time, you might owe CGT for that period.

How to Calculate Your Capital Gain

Here’s the step-by-step method:

1. Work out your cost base

This is what you paid for the property, plus certain costs:

• Purchase price
• Stamp duty (paid when you bought)
• Legal fees on purchase
• Survey, valuation, or title search fees
• Costs of improvements (e.g., new kitchen, extension) – but not repairs or maintenance
• Agent’s commission and legal fees on sale

2. Work out your capital proceeds

The sale price minus any selling costs (agent fees, marketing, legal fees).

3. Subtract the cost base from the proceeds

Capital gain = capital proceeds – cost base

If the result is negative, you have a capital loss (which can offset other capital gains but not your salary).

4. Apply the 50% CGT discount

If you owned the property for more than 12 months, you can reduce your capital gain by 50% (for individuals). This is the single biggest tax break for property investors.

Example:

• You bought a rental property for $500,000 in 2019
• Sold it in 2025 for $750,000
• Cost base (including stamp duty, legal fees, improvements) = $540,000
• Capital gain = $750,000 – $540,000 = $210,000
• Held >12 months? Yes → 50% discount applies
• Net capital gain = $105,000

This $105,000 is added to your other income for the year.

How CGT Interacts with the 2025-26 Tax Brackets

The Stage 3 tax cuts (from 1 July 2024) mean the tax brackets for 2025-26 are:

Taxable income	Tax on this income
$0 – $18,200	Nil
$18,201 – $45,000	16c for each $1 over $18,200
$45,001 – $135,000	$4,288 + 30c for each $1 over $45,000
$135,001 – $190,000	$31,288 + 37c for each $1 over $135,000
$190,001+	$51,638 + 45c for each $1 over $190,000

Plus the 2% Medicare levy applies to most taxpayers.

If your salary is $80,000 and you add a $105,000 net capital gain, your total taxable income becomes $185,000. That pushes you into the 37% bracket (up to $190,000), so you’ll pay more tax on the gain than if you earned less.

Using the Income Tax Calculator to Estimate Your CGT Bill

Here’s where our income-tax calculator becomes your best friend. Instead of guessing, you can:

1. Enter your salary (or other income) without the capital gain
2. See your tax and Medicare levy
3. Then add the net capital gain to your income
4. Compare the difference – that’s your CGT bill

For the example above:

• Salary $80,000 alone: tax ~$16,438
• Salary $80,000 + $105,000 gain = $185,000: tax ~$51,438
• CGT bill = $51,438 – $16,438 = $35,000

That’s $35,000 extra tax because of the property sale. The 50% discount saved you from paying tax on the full $210,000 – without it, your CGT bill would have been roughly double.

Key Exemptions and Special Rules

Main residence exemption

If you lived in the property as your home, you generally don’t pay CGT. But if you rented it out after moving out, you may have a partial CGT liability (the ‘absence rule’ allows up to 6 years’ exemption if you rent it out – but get advice).

Six-year absence rule

If you move out of your home and rent it, you can treat it as your main residence for up to 6 years (no limit if you don’t rent it). This means no CGT if you sell within 6 years.

Inherited property

If you inherit a property, your cost base is generally the market value at the date of death (for properties acquired after 20 September 1985). Special rules apply.

Foreign residents

From 1 July 2025, foreign residents can no longer claim the main residence exemption (with limited exceptions). If you’re an Australian expat, this is critical to understand.

Tips to Reduce Your CGT Bill

• Hold for more than 12 months – always qualify for the 50% discount
• Keep records of all costs – every receipt for improvements, not repairs
• Time your sale – sell in a year when your other income is low (e.g., after retirement)
• Use capital losses – if you have losses from other assets (e.g., shares), they can offset gains
• Consider a super contribution – if you have spare cash, concessional contributions can reduce your taxable income

The Bottom Line

CGT on property can add a big chunk to your tax bill, but the 50% discount and proper record-keeping make a huge difference. Always use the income-tax calculator to model your situation before you sell – it’s free, and it gives you a real number, not a guess.

This is general information only, not financial advice.