How Much Capital Gains Tax Will You Pay on an Investment Property?

There's no flat CGT rate on an Australian investment property. What you actually pay is your marginal income tax rate, applied to half your capital gain (if you've held the property more than 12 months) — which means the same $300,000 profit can cost one investor $55,000 and another $70,500, depending on what else they earn that year. This guide walks through exactly how that number is built, with worked dollar examples at different income levels and profit sizes, so you can estimate your own bill before you talk to an accountant.

One thing to get straight first: the 50% discount used in every example below is still the current rule. A genuinely major reform — replacing it with cost base indexation and a 30% minimum tax — passed Parliament in June 2026 and is now law, but it only applies to gains accruing from 1 July 2027 onward. If you're selling before then, or you're modelling a property you already own, the maths in this article is what applies to you today.

The five-step method the ATO uses

Every investment property CGT calculation follows the same sequence:

Work out your cost base — purchase price, plus buying and selling costs, plus capital improvements, minus any depreciation you've claimed
Subtract the cost base from your sale price to get the gross capital gain
Apply the 50% CGT discount if you've owned the property for more than 12 months
Add the discounted gain to your other taxable income for that financial year (salary, rental income, everything)
Tax the combined total at ordinary marginal rates, then subtract the tax you'd have paid without the gain — the difference is your CGT

The step almost everyone gets wrong is the first one — specifically, what actually belongs in the cost base.

Building your cost base — and what shrinks it

Your cost base isn't just what you paid for the property. The ATO lets you add several categories of cost, but it also requires you to subtract deductions you've already claimed — and that second part is the one investors most often miss.

Adjustment	Effect on cost base	Examples
Purchase price	Adds	Contract price
Incidental purchase costs	Adds	Stamp duty, conveyancing, buyer's agent fees, loan establishment fees
Capital improvements	Adds	New kitchen, extension, structural renovation
Incidental sale costs	Adds	Agent commission, marketing, legal fees on sale
Ongoing costs (not the cost base)	No effect	Rates, insurance, loan interest — these are rental deductions, not cost base items
Capital works & depreciation claimed	Subtracts	Div 43 capital works deductions and Div 40 plant depreciation claimed while renting the property out

That last row is the one that catches people out. If you've claimed capital works deductions (for the building itself) or depreciation on fittings while the property was tenanted, the ATO requires you to reduce your cost base by that amount when you sell. You got the tax benefit once, as a deduction against rental income — you don't get to also use the undepreciated original cost when working out your gain. Skipping this step understates your gain and your CGT bill, sometimes by a five-figure amount, as the worked example further down shows.

How your marginal tax rate actually applies

For the 2026–27 financial year, Australian resident individual tax rates are:

Taxable income	Tax rate
$0 – $18,200	Nil
$18,201 – $45,000	15%
$45,001 – $135,000	30%
$135,001 – $190,000	37%
$190,001 and over	45%

These are the ATO's current resident rates — the second bracket dropped from 16% to 15% on 1 July 2026. Add the 2% Medicare levy on top for most taxpayers. There's no separate "CGT rate" — your discounted gain is simply added to your other income and taxed at whichever of these brackets it falls into, which is why the same profit produces very different tax bills for different people.

Use our Capital Gains Tax Calculator to run your own cost base, sale price and income through this exact method — it takes about 30 seconds and gives you a personalised estimate before you book time with an accountant.

Same profit, different income — how much tax changes

Here's a $300,000 gross capital gain (held more than 12 months, so $150,000 is taxable) added to four different income levels:

Your income before the sale	Combined income after gain	CGT payable	Effective rate on the $300k gain
$60,000	$210,000	$54,950	18.3%
$100,000	$250,000	$60,850	20.3%
$180,000	$330,000	$69,700	23.2%
$250,000	$400,000	$70,500	23.5%

Notice the $60,000 earner still pays an 18.3% effective rate — well above the 15–16% you'd expect from "half your bracket," because half the gain ($150,000) pushes their combined income across two more brackets. This is the bracket-stacking effect: your gain is taxed at the top of your income stack, not at your everyday marginal rate.

Same income, different profit sizes

Now hold income constant at $95,000 (close to full-time average earnings) and vary the size of the gain instead:

Gross capital gain	Taxable gain (after 50% discount)	CGT payable	Effective rate on gain
$50,000	$25,000	$8,000	16.0%
$150,000	$75,000	$26,450	17.6%
$300,000	$150,000	$60,100	20.0%
$600,000	$300,000	$130,600	21.8%

As the gain grows, more of it spills into the 37% and 45% brackets, so the effective rate climbs — even though your salary hasn't changed. This is why a one-line answer like "you'll pay X%" is never accurate for property: the rate depends on the size of the specific gain being added, not just your regular income.

A full worked example, including the depreciation trap

Priya bought an investment unit in 2019 for $520,000. She paid $18,000 in stamp duty and legal fees at purchase. Over seven years of renting it out, she claimed $45,000 in total capital works and depreciation deductions on her tax returns. In 2026 she sells for $780,000, paying $19,500 in agent commission and legal fees on the sale. Her salary is $110,000.

Correct calculation:

	Amount
Purchase price	$520,000
+ Purchase costs	$18,000
+ Selling costs	$19,500
− Depreciation & capital works claimed	−$45,000
Cost base	$512,500
Sale price	$780,000
Gross capital gain	$267,500
50% discount (held 7 years)	−$133,750
Taxable gain	$133,750
Combined income ($110,000 salary + gain)	$243,750
CGT payable	$54,713

The common mistake: if Priya (or a DIY spreadsheet) forgets to subtract the $45,000 in claimed depreciation, the cost base comes out at $557,500 instead of $512,500, the taxable gain drops to $111,250, and the calculated CGT is $44,138 — a $10,575 understatement. The ATO's data-matching between rental schedules and CGT disposal labels on the tax return makes this exact gap one of the more common triggers for an amendment. Getting the cost base right the first time avoids both an underpayment surprise and a review.

Selling before you've held it 12 months

If you sell within 12 months of settlement, none of the discount applies — the full gross gain is added to your income at your ordinary marginal rate. On the $300,000 gain example above at $100,000 income, that would mean the full $300,000 is added (combined income $400,000) rather than $150,000, roughly doubling the CGT payable. If a sale is close to the 12-month mark, it's worth checking the exact settlement date before signing a contract — the discount is based on the time between your purchase contract and your sale contract, not settlement dates.

What changes from 1 July 2027

In June 2026, Parliament passed the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which replaces the 50% CGT discount for individuals with cost base indexation (adjusting your cost base for inflation) plus a 30% minimum tax on the resulting gain. This is now law, not a proposal — but it only bites on gains that accrue after 1 July 2027. Assets you already hold get their gain split at that date (via a market valuation or an ATO apportionment method), with the pre-July 2027 portion still taxed under the current 50% discount rules described in this article. For the full mechanics and worked transition examples, see our dedicated guide to the CGT changes from 1 July 2027.

Former home, now rented out

If the investment property was once your main residence, you may not owe CGT on the whole gain. Under the 6-year absence rule, you can rent out a former home for up to six years and still treat it as fully exempt, provided you don't nominate another property as your main residence in the meantime. Where only part of the ownership period was rental use, the gain is apportioned pro-rata between exempt and taxable periods. This calculation is different enough from a pure investment property that it deserves its own walkthrough — see our guide to CGT on a main residence that's been rented out for the exemption rules and apportionment formula.

Frequently asked questions

How much capital gains tax will I pay on my investment property in Australia?

It depends on your cost base, how long you've held the property, and your total taxable income in the year of sale. As a rough guide, if you've held the property over 12 months, your effective CGT rate typically falls between 15% and 23.5% of the gross gain — the exact figure depends on how much of the discounted gain pushes into higher tax brackets. Use the worked tables above or our CGT calculator for your specific numbers.

Do I get the 50% CGT discount on an investment property?

Yes, if you're an Australian resident individual and you've held the property for more than 12 months between your purchase contract date and your sale contract date. Only half the capital gain is then added to your taxable income. Properties held 12 months or less get no discount — the full gain is taxable.

Does depreciation I've claimed affect my CGT bill?

Yes. Any capital works deductions (for the building) or depreciation on fittings claimed while the property was rented out must be subtracted from your cost base when you calculate the gain. This increases your taxable gain — it does not create a separate tax, but it does mean the cost base is lower than your original purchase price plus improvements.

Is CGT calculated on the sale price or the profit?

On the profit — specifically, the sale price minus your cost base (not just the original purchase price). The cost base includes buying costs, selling costs and improvements, and is reduced by any depreciation claimed. CGT is never calculated on the gross sale proceeds.

Can I reduce my CGT by timing the sale?

Yes. Because the gain is added to your other income for that financial year, selling in a year when your income is lower (for example, after retiring, taking parental leave, or a period of reduced work) reduces the portion of the gain taxed at higher brackets. Spreading a settlement across financial years (where the contract structure allows it) can also help for very large gains.

What if I made a loss on the property?

A capital loss can't be offset against your salary or other ordinary income. It carries forward indefinitely and can only be used to offset capital gains in the same year or future years — including gains on shares, ETFs or other property.

Does the 2027 CGT reform affect a sale I'm making now?

No. The new indexation and 30% minimum tax rules only apply to gains accruing from 1 July 2027 onward. A sale completed before that date is taxed entirely under the current 50% discount rules described in this article.

This article is for general information only and does not constitute financial, tax or legal advice. Figures reflect Australian resident individual tax rates for the 2026–27 financial year and CGT rules current as at September 2026. Individual circumstances vary — consult a registered tax agent before making decisions about a property sale.