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Home › Sell Property › How to Avoid CGT on Property in Australia
If you’ve owned a property that’s grown in value, it’s only natural to wonder how much of that gain you’ll actually keep after tax. Capital Gains Tax (CGT) is one of the biggest costs property owners face when selling but the good news is, there are legitimate ways to reduce or even avoid it.
In this guide, we’ll walk you through everything you need to know about how CGT works, what exemptions you can claim, and the smart strategies Australians use to minimise their tax bill. Whether you’re a homeowner, investor, or planning to sell soon, you’ll learn:
You’re doing the right thing by planning ahead with the right records and timing, you can save thousands.
Key Takeaways You only pay Capital Gains Tax (CGT) on a property if you make a profit and it isn’t fully exempt. Your main residence is usually CGT-free, and the six-year rule can extend this exemption if you rent it out temporarily. Holding an investment property for over 12 months can give you a 50% CGT discount. You can reduce CGT by adding renovation and selling costs to your cost base. Timing your sale in a lower-income year can lower your tax bill. Offsetting losses from other investments can reduce your overall CGT liability. Company-owned properties and frequent “flips” don’t qualify for CGT discounts. Good record keeping is essential, missing receipts can cost you thousands. Plan early and seek advice from a tax professional before listing your property. Choosing the right real estate agent helps you sell smart and protect your profit.
Key Takeaways
Next step: Before diving in, it’s worth comparing experienced local agents who understand how sale structure and timing affect your net profit. Compare top real estate agents near you and find someone who can help you sell smart, not just fast.
Capital Gains Tax (CGT) is the tax you pay on the profit from selling an asset, such as a property. In simple terms, it’s the difference between what you paid for the property (your cost base) and what you sold it for.
If the sale price is higher than the cost base, that difference is your capital gain and it’s added to your taxable income for that financial year. CGT isn’t a separate tax; it’s part of your income tax.
You’ll only pay CGT if:
If you bought an investment property for $600,000 and later sold it for $850,000, your capital gain would be $250,000 (before adding costs and discounts). That amount is what CGT is calculated on.
You can reduce this gain through exemptions, discounts, and timing strategies.
The best way to avoid or reduce CGT is by understanding the legal exemptions and discounts available to Australian property owners. These rules exist to make sure people aren’t unfairly taxed on their family home or long-term investments.
Let’s go through the main ones.
If the property you’re selling has been your main home, you may not have to pay any CGT at all. The main residence exemption (MRE) applies when:
In most cases, if you’ve owned and lived in your home for the entire period, the sale is completely CGT-free. However, if you rented it out for a while or used part of it for business, only a partial exemption may apply.
If you move out of your home and decide to rent it out, the six-year rule allows you to keep treating it as your main residence for CGT purposes meaning you can still avoid paying tax when you sell. This rule can apply if:
Example:You buy a home in 2015, live there for three years, then move interstate and rent it out. If you sell it in 2024 (within six years of moving out), you could still be exempt from CGT on the full gain. If you move back in at any stage, the six-year period resets giving you another potential window.
If you’ve owned an investment property for more than 12 months, you may qualify for the 50% CGT discount. That means you only pay tax on half of your capital gain. This discount applies to:
For example, if your gain is $100,000, only $50,000 is added to your taxable income.
Tip: This discount can make a big difference, especially when combined with smart timing or offsetting strategies (covered below).
Once you understand the key exemptions, the next step is knowing how to use them effectively. The goal isn’t to dodge tax, it’s to make sure you only pay what’s legally required. With smart planning, timing, and record-keeping, you can often reduce your capital gains tax bill dramatically.
Here are the top strategies to help you do just that.
Your main residence exemption (MRE) is one of the most powerful tools for avoiding CGT but it only works if your property genuinely qualifies as your principal place of residence. Here’s how to make the most of it:
Tip: If you rent the property for more than six years or use part of it for income (like Airbnb), you may still get a partial exemption.
Your cost base includes everything you spent buying, holding, and selling your property and the higher it is, the lower your capital gain. Costs you can add include:
Routine repairs don’t count, but improvements that increase the property’s value or lifespan do.
Example: If you renovated your bathroom for $20,000, that amount can be added to your cost base, reducing your taxable gain by the same amount.
CGT is added to your taxable income for the financial year in which you sell — so timing matters.
If you expect to have a lower income in a certain year (for example, if you’re retiring, taking a break, or changing jobs), consider finalising the sale then. A lower taxable income means you may fall into a lower tax bracket, reducing how much CGT you pay overall.
Example: Selling your investment property in a year you earn $60,000 instead of $120,000 could save you thousands in tax.
If you sell your investment property after less than 12 months, you’ll pay CGT on the full capital gain. But if you hold it for more than 12 months, you may qualify for the 50% CGT discount. This alone can halve your taxable gain, so it’s often worth delaying your sale to meet the 12-month mark.
If you’ve made a loss on other investments such as shares or another property you can offset those losses against your capital gains. This means you only pay CGT on the net gain after subtracting the losses.
Example: If you made a $60,000 gain on one property but lost $20,000 on another investment, you’ll only pay CGT on $40,000.
Tip: Unused capital losses can be carried forward to offset future gains.
How your property is owned can make a big difference to your CGT outcome.
If you’re planning to invest again, speak with a tax adviser before purchasing to choose the best structure for your goals.
Warning: If you frequently buy, renovate, and sell properties, the ATO may view it as a business activity, meaning normal income tax applies instead of CGT discounts.
Most people don’t realise that for CGT purposes, the event happens when the contract is signed, not at settlement. That means if you sign a sale contract on 1 July instead of 30 June, the gain will fall into the next financial year, potentially giving you more time to plan or benefit from a lower income year.
This simple timing adjustment can make a big difference in how much tax you owe.
Choosing the right agent is the first step to selling well. Get free data on agent performance, sales volume, and prices achieved.
Even the best planning can’t always prevent CGT. Some situations automatically trigger it, no matter what exemptions or discounts you try to apply. Knowing these limits early helps you avoid surprises and make informed decisions before selling.
Here are the most common triggers that reduce or cancel your CGT benefits.
The six-year rule can be a huge help but it has limits. If you rent out your property for more than six years while it’s treated as your main residence (and you don’t move back in), your CGT exemption may only apply partially.
You’ll pay tax on the period beyond those six years. For example, if you owned the home for 10 years and rented it out for eight, roughly two years’ worth of the gain may be taxable.
If your property is owned through a company, you can’t claim the 50% CGT discount, even if it’s held for more than 12 months. That’s because companies pay a flat tax rate, not personal marginal rates, and the CGT discount only applies to individuals, trusts, and super funds.
So, while company ownership might help with asset protection, it rarely helps reduce CGT.
If you’re an Australian who moves overseas or a foreign resident for tax purposes, you may lose access to the CGT discount. Foreign residents who acquired property after 8 May 2012 generally can’t claim the 50% reduction, unless certain conditions are met.
If you’re planning an extended time abroad, speak with a qualified tax adviser before selling or changing your residency status.
If you used part of your property to run a home-based business such as an office, salon, or studio that section of your home may not qualify for the main residence exemption.
The ATO considers that portion as being used for income-producing purposes, meaning you may owe partial CGT on it when you sell.
If you regularly buy, renovate, and sell properties, the ATO may decide you’re in the business of property development, not an investor.
In this case:
This can be a costly mistake for people who flip homes frequently without realising the tax implications.
Finally, one of the most avoidable reasons people overpay CGT is missing paperwork. Without proper records of what you paid for improvements, stamp duty, or legal fees, you can’t add those costs to your cost base which means your taxable gain looks bigger than it really is. Keep a folder (digital or paper) with:
The ATO requires you to keep these records for at least five years after selling.
Capital Gains Tax can feel confusing at first, but it’s simply about planning ahead and understanding which rules apply to your situation. Whether you’re selling your family home or an investment property, there are many legal ways to reduce or avoid CGT from using the main residence exemption to timing your sale for a lower-income year.
You’ve worked hard to build your property wealth. With a few smart decisions now, you can keep more of the money you’ve earned and avoid paying more tax than you have to.
If you’re preparing to sell, don’t leave it to chance, start by finding the right professionals and getting the right advice.
Yes, if the property was your main residence the entire time you owned it, you can usually avoid CGT altogether under the main residence exemption. However, if you rented it out or used part of it for business, you may only get a partial exemption.
If you’ve owned an investment property for more than 12 months, you may be able to reduce your capital gain by 50%. The discount applies to individuals and trusts but not to companies.
Yes, CGT can apply when you sell an inherited property but it depends on when the deceased acquired it and whether it was their main residence. You may not owe CGT if you sell it within two years of inheriting it and it wasn’t used to earn income.
You can include purchase price and stamp duty, legal and conveyancing fees, agent commission and marketing costs, and major renovations or improvements (but not minor repairs). These increase your cost base and lower your taxable gain.
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