Selling Property or Investments? Navigating Capital Gains Tax in Australia

If you’re a U.S. expat living Down Under or simply have assets in Australia, understanding Australia’s capital gains tax (CGT) is essential before selling property or investments. The rules can feel overwhelming—especially when you’re juggling both U.S. and Australian tax obligations. But with the right guidance, you can approach your sale with confidence, minimize surprises, and make the most of available exemptions. Let’s break down what you need to know about Australia’s capital gains tax, from the basics to advanced strategies, so you can make informed decisions and keep more of your hard-earned gains.

Understanding capital gains tax basics

Australia’s capital gains tax isn’t a separate tax—it’s part of your income tax. When you sell (or otherwise dispose of) an asset like real estate, shares, or other investments, you may trigger a capital gain or loss. The gain is the difference between what you paid for the asset (your “cost base”) and what you received when you sold it. If you made a profit, that gain is added to your taxable income for the year and taxed at your marginal rate.

For U.S. expats, it’s important to remember that you may also have U.S. tax reporting obligations on these gains, but Australia’s capital gains tax rules will determine your liability locally. The Australian Taxation Office (ATO) expects you to report all relevant sales, even if you’re a non-resident or the asset is located overseas.

Key points:

• CGT applies to most property and investments acquired after September 20, 1985.
• The tax is triggered when you sell, gift, or otherwise dispose of an asset.
• Some assets, like your main residence, may be exempt (more on this below).

How to calculate your capital gains tax liability on property and investment sales

Calculating your CGT liability in Australia involves a few clear steps:

1. Determine your cost base: This includes the purchase price, plus certain costs like stamp duty, legal fees, and improvement expenses.
2. Calculate your capital proceeds: This is the amount you receive from the sale, minus any costs directly related to selling (e.g., agent’s fees).
3. Work out your capital gain or loss: Subtract your cost base from your capital proceeds. If the result is positive, you have a capital gain; if negative, a capital loss.
4. Apply any discounts or exemptions: If you’ve held the asset for more than 12 months, you may be eligible for a 50% CGT discount (for individuals and trusts).
5. Add the net capital gain to your taxable income: This amount is taxed at your marginal income tax rate for the year.

Example:

Suppose you bought an investment property for AUD 500,000, spent AUD 20,000 on improvements, and sold it five years later for AUD 700,000. After accounting for selling costs, your capital gain might be AUD 180,000. If you qualify for the 50% discount, only AUD 90,000 is added to your taxable income.

Key CGT exemptions and rules

Australia’s capital gains tax system offers several important exemptions and concessions:

Main residence exemption

If the property you’re selling is your main home, you may be fully exempt from CGT, provided you lived there the entire time you owned it and didn’t use it to produce income (like renting it out). Partial exemptions may apply if you rented it out for a period.

50% CGT discount

If you’re an Australian resident for tax purposes and have held the asset for more than 12 months, you can generally reduce your capital gain by 50%. This is a significant benefit for long-term investors.

Other deductions

You can add certain costs to your cost base, such as:

• Legal fees
• Stamp duty
• Improvement costs (not maintenance)
• Selling costs (agent’s commission, advertising)

These deductions can help reduce your taxable gain.

Investment property vs primary residence: Different CGT treatment and implications

The tax treatment of your property depends on how you use it:

Investment property

• Subject to CGT: Any gain from selling an investment property is generally taxable.
• Eligible for 50% discount: If held for more than 12 months and you’re a resident.
• Deductions: You can include improvement and selling costs in your cost base.

Primary residence (main home)

• Potentially exempt: If you lived in the property the whole time and didn’t rent it out, you may not owe any CGT.
• Partial exemption: If you rented it out for part of the ownership period, you may owe CGT on a portion of the gain.

The 6-year rule and other timing strategies to minimize your CGT burden

Australia’s “6-year rule” can be a powerful tool for expats and property owners:

• If you move out of your main residence and rent it out, you can still treat it as your main residence for CGT purposes for up to six years per absence.
• If you don’t rent it out, there’s no time limit—you can treat it as your main residence indefinitely while you’re away.

Timing strategies:

• Consider the 12-month holding period to qualify for the 50% discount.
• Plan sales in low-income years to reduce your marginal tax rate.
• Offset gains with capital losses from other assets.

Foreign residents and non-residents CGT rules 

If you’re a foreign resident or non-resident for Australian tax purposes, the rules are stricter:

• No main residence exemption: Since June 30, 2020, foreign residents are generally not eligible for the main residence exemption unless they meet specific life events exceptions (such as terminal illness or death of a close family member).
• No 50% discount: Foreign and temporary residents are not eligible for the 50% CGT discount on capital gains accrued after 8 May 2012, unless part of the gain was accrued while they were an Australian tax resident—pro rata discounts may still apply.
• 2025 changes: If you are an Australian tax resident and move out of your main residence and rent it out, you can still treat it as your main residence for CGT purposes for up to six years per absence. Foreign residents are not eligible for this exemption unless they meet a life events test. Stay tuned for updates and seek advice if you’re affected.

CGT on different asset types

Australia’s capital gains tax applies to a wide range of assets, including:

Real property

• Residential and commercial real estate
• Vacant land
• Leasehold interests

Shares and securities

• Listed and unlisted shares
• Units in managed funds

Other investments

• Cryptocurrency
• Collectibles (art, jewelry)
• Business assets

Each asset type may have unique rules. For example, shares are generally easier to track for cost base and sale proceeds, while property may involve more complex calculations and potential exemptions.

Reporting and payment requirements

Reporting your capital gains is a must, whether you’re a resident or non-resident:

• When to report: Capital gains and losses are reported in your annual Australian tax return for the year the sale (or disposal) occurs.
• How to report: Use the “Capital Gains” section of your tax return. You’ll need to provide details of each asset sold, including dates, amounts, and any discounts or exemptions claimed.
• Payment: Any CGT owed is included in your overall income tax bill for the year. There’s no separate payment schedule for CGT.

Ready to simplify your Australian capital gains tax journey?

Selling property or investments in Australia doesn’t have to be stressful. With expert guidance, you can navigate Australia’s capital gains tax rules, maximize your exemptions, and avoid costly mistakes—especially as a U.S. expat juggling cross-border tax obligations. Our team is here to help you every step of the way, so you can focus on your next adventure with peace of mind.

Frequently Asked Questions