Step-by-step: Property details → Sale proceeds → Cost base → Gross gain → Concessions → Ownership split
Capital Gains Tax on Property: What You Actually Need to Know Before You Sell
A plain-English guide to working out your capital gain — plus the calculator we use with clients.
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A client emailed me last week with a question I hear constantly:
“I’m thinking about selling my investment property. How do I work out my base, so I know roughly what I’ll be paying in tax?”
It’s the right question. And the answer matters — not because you should hold off a sale purely for tax reasons, but because knowing the number early helps you make a clearer decision.
Here’s the exchange that followed, lightly edited and anonymised, plus the workpaper we use with clients to estimate it themselves.
The Question — from Mark, via email
Hi Alexander,
Just had a question about my investment property and how deductions are calculated when selling the property.
I wanted to know how I work out my base, so I knew how much I would be paying in tax roughly. Is this something I should ask my accountant about?
Thanks,
Mark
My Reply
Hey Mark,
When you sell a property, two separate things happen in the tax return.
First, your normal rental period. Income and expenses stay on the rental schedule right up to the sale date — nothing unusual there.
Second — and this is the one most people don't fully understand — there's a capital gains tax event on the sale date itself. It's a completely separate calculation. You take the sale price, subtract selling costs, then compare that to your cost base (purchase price plus all your acquisition costs — stamp duty, legal, any capital improvements you've made over the years).
If you've held the property for more than 12 months, you get the 50% CGT discount. That net gain then adds to your income in the year at your marginal tax rate.
We've built a calculator for clients to input rough figures and get a guide on what the capital gain could look like. Our job is to make sure nothing is missed when it's reported in your return — but this is a good starting point.
On decision-making: if it's the right time to sell, capital gains tax shouldn't be the reason you hold off. Gains only get larger as the property grows, and I don't trust this government not to reduce concessions further. Reducing debt and financial pressure is something I'm seeing a lot of right now — sometimes rotating your investments is the right move.
Let me know how you go.
Alexander
What's Actually Happening When You Sell
There are two parts to every investment property sale, and they're taxed differently.
1. Your rental period (up to sale date)
Ordinary income tax. Rental income in, deductible expenses out. Interest, council rates, depreciation, repairs, agent fees — all the usual items stay on the rental schedule right through to the day settlement happens.
2. The CGT event on sale date
A separate calculation. This is where most of the confusion sits. In plain terms:
Capital Gain = (Sale Price − Selling Costs) − (Purchase Price + Acquisition Costs + Capital Improvements)
Selling costs include agent commission, conveyancing, marketing, PEXA fees, and any rates adjustment at settlement.
Acquisition costs include stamp duty, legal fees on purchase, PEXA fees, Land Registry / transfer fees, and any rates adjustment you paid at the time you bought.
Capital improvements cover anything structural during ownership — renovations, extensions, new kitchens. Keep the receipts.
If you've held the property for more than 12 months, you apply the 50% CGT discount — only half the gain is assessable. Whatever remains is added to your other taxable income for the year at your marginal rate.
Why You Want the Number Early
There are three reasons it pays to estimate the gain before you commit to selling.
You can plan the settlement timing
Settling in a lower-income year changes the marginal rate the gain sits in. If you're about to take maternity leave, retire, or have a quieter year in business, the difference can be material.
You can identify relief early
Main residence exemption portions, prior-year capital losses, and the 50% discount all reduce the taxable amount. These are easier to confirm before settlement, while you still have options — not after.
You can make a clearer decision
If the numbers work, you move. If they don't, you hold. Tax shouldn't drive the decision — your circumstances do — but knowing the number removes a guess from the equation.
The CGT Estimator: Client Edition
The same workpaper we use with clients, cleaned up for you to complete yourself. Enter your purchase price, sale price, and the costs on both sides; it calculates an estimated capital gain and how it splits between owners.
Once You've Got Your Estimate
Send the completed workpaper through to us. We'll review the numbers, confirm every concession that applies, and apply the full position to your return — across all owners, at each person's correct marginal rate.
Our job is to make sure nothing gets missed. The calculator gets you to a rough figure. We get you to the right one.
Thinking about selling?
Let's work the numbers together before you commit. A 20-minute conversation will tell you whether the timing, the concessions, and the net position stack up — so you can make the call with clarity, not guesswork.
