This guide outlines the key tax considerations, exemptions, and strategies relevant to property sales in Australia in 2026.
Capital Gains Tax (CGT): The Core Consideration
The primary tax implication when selling property in Australia is Capital Gains Tax (CGT). CGT applies when you sell a property for more than its original purchase price, with the gain added to your assessable income for that financial year.
For tax purposes, the capital gain is calculated by subtracting the property’s cost base (purchase price, legal fees, stamp duty, and eligible improvement costs) from the sale price. Importantly, CGT is not a separate tax but is taxed at your marginal income tax rate.
Under current Financial Service and Tax Law, CGT rules remain consistent in 2026, though increased ATO scrutiny means accurate reporting is more important than ever.
Main Residence Exemption
If the property you are selling has been your principal place of residence, you may be eligible for the main residence exemption, which can eliminate CGT entirely.
To qualify:
The property must have been your main home for the entire ownership period
It must not have been used to generate income (such as renting)
The land size must be two hectares or less
Partial exemptions may apply if the property was rented out or used for business purposes for part of the time. These rules can become complex, making professional tax advice highly recommended.
Investment Properties and the 50% CGT Discount
For investment properties, CGT generally applies in full. However, individuals and trusts may be eligible for the 50% CGT discount if the property was held for longer than 12 months.
This means only half of the capital gain is included in your taxable income. Companies, however, are not entitled to this discount under Australian Financial Service and Tax Law.
In 2026, the CGT discount remains a powerful tax-minimisation tool for long-term property investors.
Selling Property as Part of a Business
If property is sold as part of a business activity — such as property development — different tax rules may apply. In these cases, profits may be treated as ordinary income rather than capital gains, removing access to CGT concessions.
Small business owners may also be eligible for small business CGT concessions, which can significantly reduce tax liability if strict eligibility criteria are met.
Foreign Residents and Withholding Tax
Foreign residents selling Australian property in 2026 remain subject to Foreign Resident Capital Gains Withholding (FRCGW). Buyers are required to withhold a percentage of the sale price and remit it to the ATO unless the seller provides a clearance certificate.
Australian residents should ensure they obtain this certificate early to avoid unnecessary withholding at settlement.
Timing the Sale for Tax Efficiency
One often overlooked strategy is timing the property sale. Because capital gains are taxed in the year the contract is signed (not settlement), selling just after 30 June may defer CGT for nearly 12 months.
This can be particularly useful if you expect lower income in the following financial year, reducing the overall tax payable under progressive tax rates.
Record Keeping and Compliance
Accurate record keeping is critical under Australian Financial Service and Tax Law. Retain documents such as:
Purchase and sale contracts
Invoices for improvements
Agent commissions and legal fees
Poor documentation can lead to higher taxable gains or penalties if audited by the ATO.
Why Professional Advice Matters in 2026
Tax legislation is constantly evolving, and property transactions are high-value events that attract regulatory attention. Engaging a qualified tax accountant or financial adviser ensures compliance, identifies exemptions, and supports strategic decision-making.
