Important Disclaimer The information in this article is general in nature and is not financial, tax, or legal advice. Tax laws are complex and your individual circumstances will affect what applies to you. Always consult a qualified accountant, tax adviser, or financial planner before making decisions about your property sale. You can also refer directly to the Australian Taxation Office (ATO) website for official guidance.
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Selling Your Main Residence: Is There Capital Gains Tax?
The good news for most Australian homeowners selling their primary property: no Capital Gains Tax (CGT) is payable on the profit from the sale of your main residence. The main residence exemption is one of the most significant tax concessions available in Australia.
The trade-off, however, is that because your home is CGT-exempt, none of the selling costs you incur are tax deductible either. In most straightforward owner-occupier sales, the tax treatment is simple — you keep the profit, no CGT applies, and no deductions are claimed.
When Part of Your Home Was Used as a Rental
The picture becomes more complex if your main residence was also used to generate rental income at any point — for example, if you rented out a room, ran a home-based business, or rented the whole property out for a period before moving in or after moving out.
In these cases, CGT applies proportionally — only to the portion of the property and the period during which it was not your main residence. The exemption still applies to the owner-occupied portion and period.
Understanding Capital Gains Tax (CGT) on Investment Property
If you're selling a property that has been used as an investment property — whether a dedicated rental or a home that was rented for a period — CGT will apply to some or all of the profit.
CGT is not a separate tax. Capital gains are added to your assessable income and taxed at your marginal income tax rate. This means a significant profit on a property sale can push you into a higher tax bracket for that financial year.
How CGT is calculated:
CGT payable = (Sale price − Cost base) × your marginal tax rate
(subject to applicable discounts and deductions — see below)
The cost base is the total of what you paid to acquire and maintain the property, including allowable capital expenses. The higher your cost base, the lower your taxable capital gain.
What Selling Costs Can Reduce Your CGT?
When selling an investment property, a number of expenses can be added to your cost base, effectively reducing the capital gain you're taxed on. These include costs incurred both when buying and when selling the property.
Deductible CostWhen It AppliesLegal and conveyancing feesTitle search fees, transfer of ownership costs, solicitor feesReal estate agent commissionThe selling commission paid to your agentStamp dutyPaid on acquisition of the investment propertyAdvertising and marketing costsCosts to market the property for saleBuilding and pest inspection reportsCosts associated with the purchase process
Note: If a capital loss results after accounting for all buying and selling costs, that loss can be offset against other capital gains to reduce your overall tax liability — though it generally cannot be used to offset ordinary income.
Ongoing Ownership Deductions (Claimed Each Year, Not at Sale)
For investment properties, a separate category of expenses can be claimed as deductions each financial year against your rental income — rather than at the point of sale. These include:
- Mortgage interest on loans taken out in connection with the investment property
- Council rates and water rates
- Building, contents, and landlord insurance
- Property management and advertising fees
- Routine maintenance and repairs
- Accountant and adviser fees related to the investment property
Renovations and Capital Improvements
Renovation and refurbishment costs are generally treated differently to routine maintenance. They are typically classified as capital expenditure, meaning they may need to be depreciated over time rather than claimed in a single year. How these are treated depends on the nature of the work — consult your accountant or tax adviser to ensure they're handled correctly.
Partial use or partial year: If only part of your property is rented, or if it was rented for only part of the year, all relevant costs must be apportioned appropriately.
What Qualifies as Your Main Residence? (ATO Definition)
The Australian Taxation Office (ATO) uses several criteria to determine whether a property is your main residence for CGT exemption purposes:
- You live in the property
- Your personal belongings are kept there
- It is your registered mailing address
- It is your electoral address
- Utilities and services are connected in your name
There is no minimum time you must live in the property for it to qualify as your main residence, provided the above criteria are met. You can only have one main residence at a time, though a six-month overlap period applies when transitioning between properties — for example, when you've purchased a new home before selling your current one.
CGT Exemptions You Should Know About
Beyond the standard main residence exemption, the ATO recognises several additional CGT exemptions relevant to residential property:
- Large block exemption: The main residence exemption applies to the house and up to two hectares of land
- Dwelling types covered: Includes houses, flats, strata title units, retirement village units, caravans, and houseboats used as a main residence
- Aged care exemption: If you can no longer live in the property due to loss of independent living capacity, CGT exemption conditions are modified
- Pre-construction land: You can treat land as your main residence for up to four years before a dwelling is constructed on it
Important: Property investors who own vacant land — even if they intend to build on it — are not exempt from CGT on that land.
How to Reduce CGT When Selling a Property
The 50% CGT Discount
If you have owned the investment property for at least 12 months prior to selling, and you are an Australian resident, you may be eligible for a 50% discount on your capital gain. This means you only pay tax on half the profit, potentially halving your CGT liability.
Conditions apply — for example, if you've used the property as a rental or for business purposes for less than 12 months immediately before selling, you may not be eligible for the full discount. Check with your tax adviser or refer to the ATO website for your specific circumstances.
Negative Gearing
Negative gearing occurs when the income generated by your investment property (rental income) is less than your total ownership expenses — including mortgage repayments, maintenance, insurance, management fees, and rates.
When a property is negatively geared, you can claim the net loss as a deduction against your taxable income, reducing your tax bill each year. Many investors hold negatively geared properties specifically to benefit from the tax offset while the property appreciates in value — then realise the capital growth at the point of sale.
If negative gearing applies to your investment property, this is an area where professional tax advice is particularly important.
Can You Claim Real Estate Agent Fees When Selling?
Selling Agent Commission
The commission you pay to your selling agent when selling an investment property can be included in your cost base as a selling cost. This reduces your capital gain and therefore reduces the amount of CGT you pay.
Buyer's Agent Fees
If you used a buyer's agent when purchasing an investment property, those fees cannot be claimed as an immediate deduction in the year of purchase. However, they can be added to the cost base of the property, which reduces your capital gain when you eventually sell.
This means buyer's agent fees may generate meaningful tax savings at the point of sale — even if the property sells at a loss, the fees increase the capital loss that can be offset against future capital gains.
This applies specifically to investment property purchases. The treatment of agent fees for your main residence differs — as the main residence is CGT-exempt, cost base calculations generally don't apply.
Getting the Right Tax Advice
Tax deductibles, CGT, negative gearing, and cost base calculations are genuinely complex areas of Australian tax law. What applies to your situation depends on your individual circumstances — including how long you've owned the property, how it was used, your income, and whether you're an Australian resident.
LocalAgentFinder is not a tax or financial adviser. The information in this guide is intended to help you ask the right questions — not replace professional advice. Before selling your property, we strongly recommend speaking with a qualified accountant or tax professional who specialises in property.
What a great real estate agent can do is help you sell your home efficiently, at the best possible price, and with a clear understanding of the selling costs involved — giving your tax adviser the most accurate information to work with.
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FAQs: Tax When Selling Property in Australia
Do I pay Capital Gains Tax when selling my home?
In most cases, no. If the property has been your main residence for the entire period of ownership, the main residence exemption applies and no CGT is payable. CGT applies when the property was used as an investment or rental property.
What can I deduct when selling an investment property?
Key deductible costs that reduce your capital gain include: real estate agent commission, legal and conveyancing fees, stamp duty paid on purchase, and advertising costs. These are added to the cost base of the property and reduce the gain you're taxed on.
What is the CGT discount for property in Australia?
If you've owned an investment property for at least 12 months and are an Australian resident, you may be eligible for a 50% discount on your capital gain — meaning you only pay tax on half the profit. Conditions apply; check with a tax adviser.
Can I claim real estate agent fees as a tax deduction when selling?
When selling an investment property, your agent's commission is included in the cost base as a selling cost, effectively reducing your CGT liability. It's not a direct annual deduction but does reduce the taxable gain at the time of sale.
What is negative gearing in property?
Negative gearing is when the costs of owning an investment property (interest, maintenance, insurance, etc.) exceed the rental income it generates. The net loss can be claimed as a tax deduction against your total taxable income each year.
What is the main residence exemption?
The main residence exemption means you generally pay no CGT on the sale of your primary home. To qualify, the property must have been your main residence — based on ATO criteria including where you live, where your belongings are kept, and your registered addresses.
Where can I get official tax information for property sales in Australia?
The Australian Taxation Office (ATO) website at ato.gov.au is the authoritative source. For personalised advice, consult a registered tax agent or accountant with property experience.