How to Calculate Capital Gains Tax in Australia 2026-27: A Plain-English Guide

Sold an investment property? The ATO wants its share — and that share is called Capital Gains Tax (CGT). It works like this: you take what you sold the asset for, subtract what it cost you, apply any discounts you're entitled to, and the remainder gets stacked on top of your regular income and taxed at your marginal rate. Simple in theory, but the details matter enormously, especially when the discount rules, exemptions, and timing quirks can mean tens of thousands of dollars either way.

Key Takeaways

• CGT isn't a separate flat tax — your net capital gain is added to your other income and taxed at your marginal rate using the standard 2026-27 brackets.
• The contract exchange date determines your financial year, not settlement. Get this wrong and you might be filing in the wrong year entirely.
• If you've held the asset for more than 12 months and you're an Australian resident, you can cut your taxable gain in half with the 50% CGT discount — one of the best legal tax strategies available to Aussie investors.
• Capital losses must be applied before you claim the discount, and the order you apply them in actually matters.
• Your main residence is generally exempt — but the rules for partial exemptions, renting out your home, and being overseas when you sell are a lot more nuanced than most people realise.

2026-27 Resident Marginal Tax Rates

Before you can estimate your CGT bill, you need to know what bracket your total income lands in. Your net capital gain gets added to your salary, business income, or whatever else you earned — and the combined figure is what gets taxed.

These rates exclude the Medicare levy.

Step-by-Step: How to Calculate CGT on Your Property

Step 1. Lock in the CGT Event Date

This single date determines which financial year your CGT falls in — and it's not the date the money lands in your account. It's the date contracts were exchanged. For 2026-27, that date needs to fall between 1 July 2026 and 30 June 2027.

Settlement is about the money. The contract date is about the tax. Don't mix them up.

Step 2. Check if the Property is Fully Exempt

Not every sale triggers CGT. Ask yourself: is this your main home, an investment, or a holiday place?

A full main residence exemption only applies if the property was your home for the entire time you owned it and you never used it to generate income — no renters, no home business claiming floor space. If you rented it out, ran a business from it, the land exceeds 2 hectares, or you were a foreign resident when you sold, you almost certainly won't get the full exemption.

Step 3. Work Out Your Capital Proceeds

Capital proceeds is what you actually received for the property after the cost of selling it. Start with the contract sale price, then subtract your agent commission, advertising costs, and legal fees for the sale. Keep every invoice.

Step 4. Build Your Cost Base

Here's what most people get wrong about CGT — they underestimate their cost base and end up paying more tax than they need to. Your cost base is everything it cost you to buy, hold, and improve the asset.

Start with the purchase price. Add stamp duty and conveyancing fees from the purchase. Add the cost of capital improvements — genuine value-adding works like a kitchen renovation or extension, not routine maintenance. Holding costs like interest and council rates can also go in, but only if you haven't already claimed them as a tax deduction on a previous return. Double-counting is a common mistake and the ATO will pick it up.

Step 5. Calculate Your Gross Capital Gain (or Loss)

Subtract your cost base (Step 4) from your capital proceeds (Step 3). If the number is positive, that's your gross capital gain. If it's negative, you've made a capital loss — you can't offset it against your income, but you can carry it forward to reduce future gains.

Step 6. Apply Capital Losses

Losses get applied before discounts. The order here matters more than most people realise.

Use current-year capital losses first, then any losses you've carried forward from previous years. And here's the strategic part: apply your losses to gains that are not eligible for the 50% discount first — that is, assets you held for less than 12 months. This preserves the discount for your larger, long-held gains and saves you more tax overall.

Step 7. Apply the 50% CGT Discount

If you're an Australian resident individual who held the asset for at least 12 months (measured from contract date to contract date), you can halve the remaining gain after losses. That's it. Half the gain, gone — legally.

Two things to watch: the 12-month clock runs from contract to contract, not settlement to settlement. And the discount doesn't apply to any period you were a foreign resident.

Step 8. Add it to Your Income and Estimate the Tax

Take your final net capital gain and add it to your other taxable income for the year. Use the 2026-27 marginal rates table above to work out the total tax. To see exactly what the CGT is costing you, calculate your tax with the capital gain included, then calculate it without — the difference is your CGT impact.

Worked Example: Investment Property Sold in 2026-27

Let's run through a real scenario so the numbers make sense.

Scenario details:

• Purchase date: 1 July 2015
• Purchase price: $500,000
• Purchase costs: Stamp duty $15,000, conveyancing $1,200
• Renovations: $20,000 (completed in 2018)
• Sale date: 1 May 2027
• Sale price: $800,000
• Selling costs: Agent commission $12,500, conveyancing $1,300
• Owner's salary: $120,000
• Held for over 12 months — 50% discount applies

So the 50% discount turned a $250,000 gain into a $125,000 taxable event — saving this person roughly $49,900 in tax compared to what they'd have paid without it. That's the discount doing its job.

Cost Base Checklist: What Counts and What Doesn't

The 5 Elements of Your Cost Base

1. Purchase price — The amount you actually paid for the asset.
2. Incidental costs — Stamp duty, legal fees, agent commissions on both buying and selling.
3. Ownership costs — Interest, rates, and land taxes, but only where you haven't already claimed them as a tax deduction.
4. Capital improvements — Renovations and extensions that genuinely add or preserve value. Not repairs.
5. Title costs — Legal fees to defend your ownership of the property.

Items People Commonly Forget

• Stamp duty paid at purchase
• Conveyancing fees when you bought
• Agent commission when you sold
• Invoices for major renovations
• Advertising costs for the sale

Items That Don't Belong in the Cost Base

• Loan repayments — Paying down mortgage principal isn't a cost base item.
• Depreciation — You can't include depreciation you've already claimed as a deduction.
• Repairs — If you claimed a repair as a rental deduction, it can't also go into the cost base.
• Your own labour — Time and effort don't count, even if you did the renovation work yourself.

Your Main Residence: When CGT Gets Wiped Out (or Just Reduced)

The Full Main Residence Exemption

This is the best outcome — zero CGT. But the conditions are strict.

The property must have been your home for the entire time you owned it. You can't have used it to earn income at any point. The land must be 2 hectares or less. And you can only ever claim one main residence at a time.

The example that makes it click: you buy a house for $600k, live in it for 10 years, never rent it out, sell it for $900k. Your net capital gain? $0.

The Partial Main Residence Exemption

This is where it gets a bit more involved. If you lived in the property for only part of your ownership period, or rented part of it out, you'll likely get a partial exemption — and the taxable portion is worked out on a pro-rata basis.

Time-based apportionment applies when you lived there for only some of the years you owned it:

Taxable gain = Total capital gain × (non-main residence days ÷ total ownership days)

Floor-area apportionment applies when part of the home was used to generate income (like a dedicated home office you claimed on tax):

Taxable gain = Total capital gain × (proportion of floor area used for income) × (period of income use ÷ total ownership period)

There's also a specific rule for properties that were your main residence before 20 August 1996 and first rented out after that date — the cost base for the income-producing portion can be the market value at the time you first started earning income from it.

The Six-Year Absence Rule

This one's worth knowing inside out. If you move out of your main residence and rent it out, you can keep treating it as your main residence for CGT purposes for up to six years — as long as you don't nominate another property as your main residence during that time.

Move back in and re-establish it as your home, and the six-year clock resets. But if you rent it for more than six years straight, you'll owe CGT apportioned to the period beyond six years.

Real-world example: you live in your home for five years, move out and rent it for seven years, then sell. The first six years of renting are fully covered. You only pay CGT on the one year beyond the six-year window.

The 6-Month Overlap Rule

If you buy a new home before selling the old one, you can treat both as your main residence for up to six months simultaneously — provided certain conditions are met. It's the ATO's way of acknowledging that property transactions don't always line up neatly.

Special Situations That Change Everything

Foreign Residents

The rules are strict and the stakes are high.

If you're a foreign resident at the time of sale, the main residence exemption is generally not available for disposals after 30 June 2020. There is a life events test that can still allow the exemption — but only if you've been a foreign resident for a continuous period of six years or less immediately before the CGT event, and one of these applies:

• You, your spouse, or a child under 18 passes away.
• You, your spouse, or a child under 18 is diagnosed with a terminal illness or serious medical condition.
• Your marriage or relationship breaks down (formally separated or divorced).

The 50% CGT discount also won't apply to any period you were a non-resident. If you've got a mix of Australian and foreign residency periods in your ownership history, get professional advice before you file.

Assets Acquired Before 20 September 1985

Properties bought before this date are generally "pre-CGT" assets and are exempt from capital gains tax entirely. But there's a catch: major capital improvements made after 20 September 1985 are treated as separate post-CGT assets. When you sell, you may need to apportion the proceeds between the exempt pre-CGT portion and the taxable post-CGT improvement portion. Keep the receipts, dates, and any valuations that support this split.

Inherited Property

When you inherit a property, the CGT treatment depends on whether it was the deceased's main residence and whether it was used to produce income. In many cases, your cost base will be the market value at the date of death, which means CGT starts accruing from that point forward. A proper valuation at the date of death isn't just good practice — it's the foundation of your future CGT calculation.

Multiple Gains and Losses in One Year

If you've had several CGT events in the same year, you can't just pick the ones you want to offset. Here's the correct approach:

1. Total up all your gross capital gains for the year.
2. Subtract current-year capital losses, then apply any carried-forward net capital losses.
3. Apply losses to non-discount-eligible gains first (assets held under 12 months) before touching discount-eligible gains. This maximises the benefit of the 50% discount.
4. Apply the 50% CGT discount to any remaining discount-eligible gains.
5. The final number is your net capital gain — the amount that goes into your taxable income.

Any net capital losses left over can be carried forward indefinitely. But they can't offset your ordinary income. Ever.

Your "Get it Done" Checklist

Use this when you're pulling together documents for tax time.

• Gather your sale and purchase contracts plus all settlement statements
• Collect invoices for stamp duty, conveyancing, agent fees, and renovations
• Confirm the contract dates for both purchase and sale
• Calculate your capital proceeds
• Build your cost base
• Work out your gross gain or loss
• Apply capital losses (non-discountable gains first)
• Apply the 50% CGT discount if you held for over 12 months
• Add the net capital gain to your income for the year
• Estimate your tax using the 2026-27 resident rates

Mistakes That Cost People Money

Five errors that show up constantly — and how to avoid them.

1. Using settlement date instead of contract date. Always use the contract exchange date for timing.
2. Applying the 50% discount before losses. Losses always come first. And apply them strategically.
3. Counting costs you've already claimed. Check your old tax returns before building the cost base.
4. Forgetting to deduct selling costs. Agent commission and legal fees reduce your gain — don't leave them out.
5. Thinking CGT is a separate flat tax. It's not. Your net gain is added to your income and taxed at your marginal rate.

Record Keeping: If You Can't Prove It, You Can't Claim It

Documents to Keep

• Purchase and sale contracts
• Settlement statements for both buying and selling
• Invoices and receipts for all improvements, buying costs, and selling costs
• Evidence of when the property was your main residence — utility bills, driver's licence records, or electoral roll enrolment
• Records of occupancy periods versus income-producing periods (for partial exemption calculations)
• Valuations used for apportionment or deemed acquisition dates — especially for pre-CGT assets or properties first rented out after 20 August 1996

The ATO can review your tax affairs for several years after lodgement. Hold on to your CGT records for at least five years after you sell, ideally longer.

The Bottom Line

CGT doesn't have to be complicated once you know the sequence: proceeds minus cost base, subtract losses strategically, apply the 50% discount if you qualify, add it to your income. The mistakes that cost people money aren't usually technical — they're timing errors, forgotten deductions, and not knowing the exemptions they're entitled to.

If you're selling an investment property this financial year, get your documents together early, use the right dates, and make sure your cost base is as complete as it can be. Run your scenario through the Capital Gains Tax Calculator first. A good accountant can often find inclusions you've missed — and on a property sale, that's well worth the fee.

This article contains general information only. It does not constitute financial or tax advice. Your tax outcome depends on your individual circumstances and the latest ATO rules. Speak to a registered tax agent for advice specific to your situation.