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Home › Sell Property › When Do You Pay Capital Gains on a Property?
Selling a property can be exciting but it can also come with one important financial consideration, the capital gains tax (CGT). Many Australians wonder exactly when they have to pay it. Is it when the sale settles, when you sign the contract, or when you file your tax return?
Understanding when CGT applies can save you from last-minute surprises and help you plan your sale wisely. In Australia, capital gains tax isn’t a separate tax, it’s part of your income tax. That means the timing of your sale, and when you report it, can influence how much tax you’ll actually owe.
If you’re selling an investment property, a rental, or even a former home, knowing when CGT kicks in helps you prepare your finances early and avoid cash flow stress. This guide explains everything you need to know from when the CGT event happens, to how exemptions (like the main residence rule or six-year rule) can reduce or even eliminate your tax bill.
We’ll also walk through examples to show how contract dates, settlement dates and financial years affect when you report and pay capital gains tax. Whether you’re planning a sale now or just researching, this is the simple, Australian guide to understanding CGT timing the right way.
Key Takeaways The CGT event happens on the contract date, not the settlement date. You report and pay the tax when lodging your income tax return for that financial year. Your main residence is usually exempt, while investment or rental properties are taxable. Holding a property for over 12 months can qualify you for the 50% CGT discount. The six-year rule can help homeowners who’ve rented out their former home avoid or reduce CGT. Timing your contract, just before or after 30 June, can affect when your tax is due and how much you pay. Always keep good records of costs, improvements, and receipts to maximise your deductions.
Key Takeaways
Next Step: If you’re thinking about selling soon, the right real estate agent can help you time your sale for the best financial outcome. Compare top local agents, see who knows your suburb best, and make a confident start to your selling journey.
Before diving into when you pay capital gains tax, it helps to first understand what it actually is.
Capital gains tax (CGT) is the tax you pay on the profit made when you sell an asset like a property for more than what it cost you to buy it. In simple terms, your capital gain is the difference between your sale price and your cost base (what you originally paid for the property plus related costs like stamp duty, legal fees, and improvements).
Unlike stamp duty or land tax, CGT isn’t a separate tax. It’s part of your income tax. That means your capital gain is added to your other income (like salary or business income) and taxed at your marginal tax rate for that financial year. According to the Australian Taxation Office (ATO), you only make a capital gain or loss when a CGT event occurs typically when you sell or dispose of your property.
Not all property sales trigger CGT. The rules depend on the type of property and how you used it:
If you’ve owned the property for more than 12 months before selling, you may be eligible for a 50% CGT discount on the gain (for individuals), reducing the taxable portion by half. This is one of the most valuable benefits for long-term investors.
Understanding what’s taxable and what’s exempt is the first step in managing your obligations and timing your sale wisely.
One of the most common points of confusion for property sellers is when the capital gains tax event actually takes place. Is it when you sign the contract, or when the buyer pays you at settlement? The answer matters because it determines which financial year your gain is reported in and when the tax becomes due.
According to the Australian Taxation Office (ATO), for most property sales in Australia, the CGT event happens on the day you sign the contract of sale, not at settlement. This means the timing of that contract signature can shift your tax obligations by an entire financial year.
Let’s say you sell an investment property and:
Even though you won’t receive the full payment until August, your CGT event date is 15 June 2025. That means you must include the gain in your 2024–25 income tax return, not 2025–26.
This timing rule often surprises sellers, especially those expecting to report it in the year they actually receive the money. It’s a key reason to consult your accountant before signing, the date you sign could affect your overall tax bill, particularly if you’re near the end of the financial year.
There are a few exceptions and nuances worth noting:
In short, when it comes to CGT, the contract date is king. The moment you sign that contract, your taxable gain (or loss) is locked in for that financial year.
Now that you know the CGT event date happens when you sign the contract, the next question is: When do you actually have to pay?
The good news is you don’t pay capital gains tax immediately when you sell your property. Instead, you report the gain in your income tax return for the financial year in which the contract was signed and the Australian Taxation Office (ATO) assesses the amount when your return is processed.
Let’s say you sign a contract to sell your investment property on 20 March 2025, with settlement in June 2025. Because the contract was signed before 30 June 2025, you’ll need to include the capital gain in your 2024–25 tax return, which is typically due by 31 October 2025 (or later if lodged by an accountant).
You’ll pay any tax owing after your tax return is assessed by the ATO, not at the time of sale. So while the tax isn’t immediately due, it’s important to plan ahead.
Many property owners are caught off guard by the timing because the tax bill often arrives months after the sale proceeds have already been spent.
That’s why experts recommend setting aside a portion of your sale proceeds to cover your CGT liability when tax time comes.
If you lodge through an accountant, you might have until May of the following year to pay, but planning early is crucial to avoid cash flow stress or late-payment interest.
Your accountant can help you forecast how much CGT you’ll owe based on your income level, any exemptions, and the timing of your sale. If you’re selling late in the financial year, they may even suggest delaying signing the contract until after 30 June to shift your tax liability into the next financial year giving you more time to prepare.
Not every property sale in Australia triggers capital gains tax. The Australian tax system includes several exemptions and discounts that can reduce, delay, or even eliminate your CGT liability especially if the property was your main home. Understanding these can help you plan your sale strategically and avoid paying more tax than necessary.
If the property you’re selling has been your main residence (your home) for the entire time you owned it, you may be fully exempt from CGT. The Australian Taxation Office (ATO) explains that this exemption applies if:
If you meet all these conditions, you won’t need to pay CGT when you sell, no matter how much the property has increased in value.
Life changes and sometimes homeowners move out and rent their property. The six-year rule allows you to keep treating your former home as your main residence for up to six years while it’s rented out, meaning you could still be exempt from CGT if you sell within that time.
For example, if you lived in your home for several years, moved out in 2020 and started renting it, you could still sell it before 2026 and potentially avoid CGT altogether, as long as you didn’t treat another property as your main residence during that period.
If you rent it out for longer than six years, you may be eligible for a partial exemption, where CGT only applies to the period after the six years ended. This rule can make a significant difference for sellers who’ve temporarily relocated or kept their property as an investment.
Selling soon? Find trusted local agents who can help you time your sale for the best after-tax result.
If you’ve owned your property for at least 12 months, you may qualify for the 50% CGT discount. This means only half of your capital gain is added to your taxable income. For instance, if your total gain was $100,000, only $50,000 would be subject to tax.
This rule applies to:
It’s important to note that the 12-month period is measured up to the date of the contract, not settlement reinforcing how timing affects your eligibility.
If you only meet the exemption rules for part of the ownership period (for example, you lived in the home for three years and rented it out for five), the ATO allows a partial CGT exemption. Your accountant can help calculate the proportion that’s taxable versus exempt, based on days lived versus days rented.
Together, these exemptions and discounts can make a massive difference to your final tax bill. That’s why it’s vital to review your property’s history, usage, and ownership timeline before selling, so you don’t miss out on valuable tax savings.
Capital gains tax isn’t just about what you sell, it’s about when and how you sell. Smart planning can make a big difference to how much CGT you end up paying. With a few careful steps, you can manage your timing, prepare your finances, and even reduce your tax liability.
Because the CGT event happens at the contract date, the timing of when you sign can influence which financial year your gain falls into and therefore, how much tax you’ll pay that year.
If you’re expecting a lower income next financial year, delaying your sale until after 30 June could mean paying less tax overall. For example, if you’re retiring, taking extended leave, or reducing your working hours, it might make sense to shift the CGT event into a year with a lower taxable income.
On the other hand, if your income will rise next year, you might want to finalise the sale before 30 June to keep your CGT in the current year’s return.
Quickly calculate how much CGT you may owe before selling your property. Plan ahead and avoid tax-time surprises.
The cost base determines how much capital gain you’ll report and the more legitimate costs you can include, the smaller your taxable gain. The Australian Taxation Office (ATO) defines cost base as the property’s purchase price plus eligible costs such as:
Keeping all receipts and records for these can significantly reduce your CGT liability.
Before you list your property, speak with a tax accountant or financial adviser. They can help you estimate your potential capital gain, identify exemptions, and plan the best time to sell. Even a small change in timing such as signing the contract a few days later can affect your entire tax year and payment deadline.
Because CGT is payable when your tax return is lodged and assessed, not at sale, you’ll likely receive your full sale proceeds at settlement. However, it’s smart to set aside a portion (often around 20–30% of your profit, depending on your situation) to cover the tax bill when it comes due. This helps you avoid cash flow issues or unexpected debt at tax time.
If you own multiple properties or plan to sell more in future, timing becomes even more important. Staggering sales across financial years can prevent large one-off tax spikes. An accountant can help you create a sales strategy that aligns with your long-term goals.
Even experienced property owners can slip up when it comes to capital gains tax. The rules around timing, exemptions and reporting can be confusing and small errors often lead to bigger tax bills or compliance issues later. Here are the most common mistakes Australian sellers make, and how to avoid them.
This is by far the most frequent mistake. Many people assume they only make a capital gain once the property settles but the CGT event happens when the contract is signed, not when you receive the money.
If you sign the contract on 29 June and settlement isn’t until August, your gain still belongs in the previous financial year’s tax return. Getting this wrong can throw off your reporting and potentially lead to ATO penalties.
Some sellers assume their home automatically qualifies for the main residence exemption, but that’s not always true. If you rented the property, used it for business, or owned another home during the same period, you may only get a partial exemption. The ATO has clear criteria for what counts as your main residence and it’s worth checking before assuming your sale is tax-free.
The six-year rule can save you thousands, but it’s easy to overlook. If you rent out your former home, you can usually claim it as your main residence for up to six years. After that, you’ll start accruing taxable capital gains. Sellers who don’t track their timelines properly sometimes miss out on full exemption eligibility by just a few months.
Renovations, extensions, and even landscaping can increase your cost base, reducing your taxable gain. However, you must keep detailed receipts and records to prove the costs. Without them, the ATO won’t allow those deductions, meaning you could pay CGT on profit you never really made.
Because CGT is paid later at tax time, many sellers spend or reinvest all their profits too quickly. Then, when their tax bill arrives months later, they’re caught off guard. Always set aside funds early for the expected tax to protect your cash flow and peace of mind.
Each property and ownership history is unique. Trying to calculate CGT yourself using rough estimates or online calculators can lead to inaccurate results. A qualified tax adviser or accountant can help you identify deductions, confirm exemptions, and make sure you don’t pay more than necessary.
Not sure when to sell or how CGT might affect you? Speak with experienced agents who understand your suburb and your goals.
Selling a property is a big financial move and capital gains tax can play a major role in the outcome. The best thing you can do now is plan ahead. Know when your CGT event will occur, understand whether you qualify for any exemptions, and make sure you’re prepared to report it correctly when tax time comes around.
Before signing a contract, it’s wise to speak with your accountant or financial adviser. They can help you calculate your potential tax bill, estimate how much to set aside, and make sure you’re selling at a time that makes sense for your finances. A few days’ difference in your contract date could shift your tax liability by an entire year, giving you extra breathing space and flexibility.
If you’re thinking about selling soon, remember that your real estate agent also plays a key role. The right agent understands your local market, helps you price strategically, and can time your sale to align with your financial goals. Whether you’re selling an investment property or your former home, working with an experienced agent can mean a smoother sale and a better after-tax result.
Capital gains tax doesn’t have to be confusing. Once you understand when it applies, how it’s calculated, and which exemptions you might qualify for, you can sell with confidence and avoid costly surprises. With the right advice and timing, you’ll be in control of your property’s true profit.
If you’re preparing to sell, the smartest first step is to compare top-performing local agents who understand your area and can help you achieve the best result.
Yes, the contract date determines the CGT event, not the settlement date. This means the financial year in which you sign the contract decides when you report the gain, even if settlement and payment occur months later.
In most cases, no. If the property was your main residence for the entire ownership period, it’s usually exempt from CGT under the ATO’s main residence exemption. However, partial CGT may apply if you rented it out or used it for business.
You must own the property for at least 12 months before the contract date of sale to qualify for the 50% discount (for Australian residents). This rule encourages long-term investment and halves the taxable portion of your capital gain.
You report the gain in your tax return for the financial year in which the contract was signed. For example, if you signed on 10 April 2025, you’d include the gain in your 2024–25 return, usually lodged by 31 October 2025.
No. CGT isn’t paid at settlement. It’s due after your tax return is assessed by the ATO. That’s why it’s important to set aside part of your sale proceeds to cover the tax when payment time comes.
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