By the time most investors ask how to reduce the capital gains tax on a sale, most of the answer is already fixed. Who sits on the title was decided at purchase. Whether the six year rule is available was decided when you moved out. Whether your cost base is complete was decided by whether you kept receipts nobody told you would matter.
Three levers are still open on the day you list. The other three were settled years earlier, and if you missed them there is nothing to be done about it now. On the $958,000 sale below, the receipts alone are worth $24,160.
What moves the number, and when
Six things move the number for most investors. Three are locked in long before you decide to sell: who holds the title, whether the property was ever your home, and what you can prove you spent on it. Three are still live in the year you sell: whether you clear 12 months, which financial year you exchange in, and how you apply capital losses. Everything else is noise.
One warning before any of it. From 1 July 2027 the 50% discount is replaced for individuals, trusts and partnerships, so the standard playbook written over the last twenty years is about to be half wrong. The last section covers what survives.
Who holds the title, decided at purchase
The discount is not the same for every owner. Individuals and Australian trusts discount a gain by 50%. Complying super funds discount by 33.33%. Companies get no discount at all, which is why a company can be an expensive place to hold an appreciating property.
You cannot fix this later. Changing the owner after the fact is itself a CGT event, so the structure you sign up for on your first purchase is the one you sell under a decade later. Our guide to trust structures for property investors covers where the trade-offs sit.
The six year rule, if you lived there
If the property was your home first, this is usually the largest reduction available, and it is the one investors most often do not know they qualify for.
You can keep treating a former home as your main residence for up to six years while it earns rent, and indefinitely if it earns nothing (ATO). Two conditions bind it. It has to have been your actual main residence first, so a property you rented out before you moved in does not qualify for that earlier period. And you cannot treat another property as your main residence for the same period, except for a six month overlap while you are moving. You also choose when the period stops, which matters if you own two properties and have to pick between them.
The six years also applies to each period of absence rather than to the property. Move back in, and a later absence starts a fresh six years. The ATO says a period of absence stops when you either move back in or leave it vacant.
For anyone rentvesting, that rule is the difference between a fully exempt sale and a fully taxed one. It is also decided the day you move out, not the day you sell.
Your cost base, built over the hold
The cost base has five elements, and most people use one of them. Take a house bought at $612,000 and sold at $958,000.
| Cost base item | Amount |
|---|---|
| Purchase price | $612,000 |
| Stamp duty | $22,800 |
| Conveyancing on the purchase | $1,900 |
| Building and pest inspection | $650 |
| Buyers agent fee | $15,000 |
| Kitchen and bathroom, capital improvement | $37,200 |
| Selling agent commission | $19,160 |
| Marketing the sale | $4,500 |
| Conveyancing on the sale | $1,600 |
| Less capital works already deducted | -$46,000 |
| Cost base | $668,810 |
The ATO lists ten incidental costs in the second element, and they cover more than people expect: stamp duty, and the fees of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser. Tax advice counts where a recognised tax adviser gave it. So does advertising to find a buyer, and the cost of a valuation.
Count only the purchase price and the assessable gain is $196,000, for a tax bill of $83,970 on a $110,000 salary. Build the cost base in full and the assessable gain is $144,595 and the bill is $59,810. The $102,810 of claimable costs is halved by the discount and lands at the top marginal rate, which is where the $24,160 comes from.
Every one of those line items is a receipt from a decision you made years ago. There is no version of this you can do in the week before settlement.
There is a third element people miss on vacant land. Rates, land tax, insurance, repairs and non-deductible interest can go into the cost base, but only where you could not deduct them. On a rented property you already claimed them, so they cannot go in twice.
The capital works deduction comes back
That minus $46,000 in the table is not a mistake. Capital works deductions you have claimed under Division 43 cannot sit in the cost base. Every dollar of building write-off you took over the years increases the gain when you sell.
That is not an argument for skipping the claim. You took the deduction at your full marginal rate each year, and it comes back against a gain that the discount has already halved. Claiming $46,000 at 37% returns $17,020 along the way and costs about $10,810 at sale. You are still well ahead, and you had the money earlier. But if your depreciation schedule has been running for a decade, the add-back is larger than most sellers expect, and it belongs in the numbers before you list.
The 12 month test and the contract date
Everything to this point was settled long before you thought about selling. The next three are still yours to control, and this is the one with the hardest edge.
The 50% discount applies if you owned the asset for at least 12 months and you are an Australian resident for tax purposes (ATO). It applies to more sales than anything else on this page, and it is binary. Eleven months and 29 days gets you nothing.
The trap is which date counts. The CGT event happens on the date of the contract, not when you settle. The ATO is explicit that property sales usually work this way. You also exclude the day you acquired the asset and the day of the CGT event when counting the 12 months.
So a purchase contract signed in March 2025 and a sale contract signed in February 2026 miss the discount, even if settlement lands in April. On the gain in the example above, waiting those few extra weeks is worth $67,960. Check your original contract date before you sign anything.
There is one extension most write-ups leave out. The ATO allows an additional discount of up to 10%, taking the total to up to 60%, for individuals who provide affordable rental housing to tenants on low to moderate incomes. The conditions are narrow and it will not suit most investors, but it is worth checking if affordable housing is already part of what you do.
Which financial year you exchange in
The gain is assessed in the year you sign the contract, not the year you settle and not the year the money arrives. It then stacks on top of whatever else you earned that year, which is why the same gain costs different people very different amounts.
Take the $144,595 assessable gain from the example above. On a $110,000 salary it costs $59,810. On a $45,000 salary it costs $50,092. Same property, same gain, $9,718 apart, decided by which year you exchange in.
That matters if your income is about to change. Retirement, parental leave, a year between jobs or a loss-making year in a business all pull the same gain into a lower band. Exchanging in July rather than June moves it a full financial year.
The caveat is the one that applies to every idea on this page. A sale timed for tax on a property that should have been sold last year is still a bad sale.
Capital losses, in the right order
Capital losses come off the gain before the discount, never after. Where you have both kinds of gain in the same year, spending a loss on the wrong one costs you half its value.
The ATO lets you choose which gains to apply losses against, and says to subtract them from gains that are not eligible for the discount first, because that gives the lowest tax. A $50,000 loss applied to a discounted property gain removes $50,000 from the gross gain, so $25,000 from the assessable amount. The same loss applied to an undiscounted gain removes the whole $50,000. Same loss, twice the value.
You do not get to bank a loss for a better year. Current year losses have to go against current year gains, and the choice you have is which gain, not whether. Only the part that exceeds your gains becomes a net capital loss, and that carries forward with no time limit, applied in the order you made them. Capital losses cannot come off your salary either, only off capital gains.
What changes on 1 July 2027
From that date the 50% discount is replaced for individuals, trusts and partnerships. Your cost base gets indexed by CPI so only the real gain is taxed, and a 30% minimum rate applies to real gains for resident individuals. Complying super funds are untouched and keep the 33.33% discount. We have modelled who pays more and who pays less, and the shape of it catches people out. The new regime is gentle on weak growth and punishing on strong growth.
Three things follow for anyone holding property now.
Gains accrued before 1 July 2027 keep the 50% discount. They are split out by valuation at that date, so you do not have to sell early to protect the gain you have already made. We covered whether to sell before the deadline separately, and for most people the answer is no.
That split leans on a market valuation at 30 June 2027. It is the one genuinely time-sensitive item on this page. Get the valuation and keep it.
The detail is not settled yet. The ATO’s own CGT pages carry a notice that the changes announced in the 2026-27 Federal Budget do not apply to Tax Time 2026 and that resources will be available later. Anyone publishing certainty about the transitional mechanics right now is guessing.
What we tell clients
The pattern across all six is the same. The levers worth the most are the ones you set years before the sale, and the ones still available at the end are the smallest. A $24,160 cost base is built from receipts you filed a decade earlier. A fully exempt sale under the six year rule was decided the week you moved out.
So the useful version of this is not a checklist for sellers. Keep the contract, the settlement statement, every invoice and the depreciation schedule from the day you buy. Get the ownership structure right on the way in, while it is still free to change.
With a sale contract already in front of you, work the last three hard. Before your next purchase, you have all six.
Run your own numbers through our capital gains tax calculator, which models both the current discount and the 2027 regime side by side, before you talk to your accountant rather than after.
This is general information only and not financial advice. Tax treatment depends on your circumstances. Speak to a qualified professional before making investment decisions.
If you want the tax position modelled on a specific property before you buy or sell, book a free discovery call.
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