How is capital gains tax calculated on an investment property in Australia?

CGT = (sale price − cost base) × your marginal tax rate, with a 50% discount if you held the property for more than 12 months. The cost base includes your purchase price, stamp duty, legal fees, and capital improvements, minus any Division 43 depreciation you have claimed. For properties sold after 1 July 2027, a dual-regime calculation applies: gains accruing before July 2027 keep the 50% discount, and gains accruing after that date are taxed at a 30% minimum using CPI-indexed cost base.

What is the 2027 CGT change in Australia?

Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. From 1 July 2027, the 50% CGT discount on residential investment property is abolished for gains accruing after that date. Instead, the post-2027 gain is measured against a CPI-indexed cost base and taxed at a 30% minimum rate. Properties purchased before July 2027 and sold after that date require a split calculation: the pre-2027 portion keeps the 50% discount, and the post-2027 portion uses the new rules.

Does Division 43 depreciation affect my CGT?

Yes. Every dollar of Division 43 (building allowance) depreciation you have claimed reduces your cost base by the same amount. If you claimed $40,000 in depreciation over the years, your cost base is $40,000 lower than your purchase price plus costs — which means your taxable capital gain is $40,000 higher than you might expect. This is not a tax trap but rather the ATO recapturing the deductions already given. Your depreciation schedule from your quantity surveyor will show the total claimed to date.

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GetReal — Methodology

Capital gains tax

v1.0 — September 2026 · legislation current as at Royal Assent 26 June 2026

GetReal calculates capital gains tax on Australian residential investment properties using ATO cost base rules, the 50% CGT discount, and — for properties sold after 1 July 2027 — the dual-regime calculation under Treasury Laws Amendment (Tax Reform No. 1) Act 2026. Tax brackets are sourced from the ATO and stored in the income_tax_brackets Supabase table. CPI data comes from the ABS quarterly release and is stored in cpi_quarterly.

1. How the cost base is calculated

Your capital gain is not simply the difference between what you sold for and what you paid. It is sale proceeds minus your cost base — and the cost base includes a range of costs you incurred acquiring, holding, and selling the property.

The ATO defines the cost base across five elements (ITAA 1997 s.110-25). GetReal uses elements 1, 2, 4, and 5 — the elements a non-accountant can reasonably know without professional advice.

Cost base = purchase_price + stamp_duty + legal_fees_purchase + building_inspection_and_other_purchase_costs + capital_improvements − div43_depreciation_claimed + agent_commission + legal_fees_sale + other_sale_costs // Note: cost base additions from elements 3 and 5 (ownership costs such // as rates, insurance, body corporate) are not modelled — these are hard // to track across years and most investors have already deducted them.

What counts as a capital improvement (vs a repair)?

Only spending that adds value, extends the property's life, or changes its character is a cost base addition. Routine repairs and maintenance are not — those are deducted as expenses in the year incurred. The ATO's test: would the property be materially different without this spending?

Counts as capital improvement	Does not count
New kitchen or bathroom	Repainting walls
Extension or additional room	Replacing a broken tap
New roof (where none existed or as major structural replacement)	Garden maintenance
Retaining walls, driveways, decking	Carpet cleaning between tenants
Dual occupancy conversion	Fixing storm damage

ATO source: Repairs, maintenance and improvements — ato.gov.au

2. The 50% CGT discount

Under current law (ITAA 1997 Div 115), individuals who hold a capital asset for more than 12 months before selling it can discount their capital gain by 50% before adding it to their taxable income. The discount applies after capital losses are offset — so losses reduce the gain first, then the 50% discount applies to the remainder.

// Sequence matters — losses before discount Net gain = gross_gain − capital_losses Discounted gain = net_gain × 0.5 // only if held > 12 months Taxable gain = discounted_gain + other_income Tax payable = tax_on_taxable_gain − tax_on_other_income

The 50% discount is not a separate tax rate — it reduces the amount of gain that gets added to your income, which is then taxed at your marginal rate. The effective rate on the gain is therefore half your marginal rate. At a 37% marginal rate, you pay approximately 18.5% of the gross gain in tax.

Assets held less than 12 months do not qualify. The full gross gain is added to income and taxed at your full marginal rate.

Worked example — pre-2027 sale, held > 12 months

Purchase price                $600,000
+ Stamp duty + legal fees     $30,000
+ Capital improvements        $40,000
− Div 43 claimed              $20,000
─────────────────────────────────────
Cost base                     $650,000

Sale price                    $950,000
− Cost base                   $650,000
─────────────────────────────────────
Gross gain                    $300,000
× 50% discount                $150,000
─────────────────────────────────────
Taxable gain                  $150,000

Other income (salary)         $90,000
Total taxable income          $240,000
Marginal rate (on gain)       47%  (top bracket at this income)
Tax on gain                   $70,500
Effective rate on gross gain  23.5%
      

3. The 2027 dual-regime — how the split works

Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. From 1 July 2027, the 50% CGT discount on residential investment property is abolished for gains accruing after that date. This does not affect gains accrued before July 2027.

Properties purchased before 1 July 2027 and sold after that date require a dual-regime calculation: the gain is split between a pre-2027 component (which keeps the 50% discount) and a post-2027 component (which uses the new CPI-indexed rules).

The apportionment formula

The Act (Subdiv 112-E) allows a time apportionment election — the gain is split proportionally by the number of days the property was held before and after 1 July 2027. This is the method GetReal uses.

// For PPOR-converted properties, the period starts from rental start date // For pure investment properties, the period starts from purchase date investment_days = days from investment_start to sale_date pre_2027_days = days from investment_start to 1 Jul 2027 post_2027_days = days from 1 Jul 2027 to sale_date pre_2027_gain = effective_net_gain × (pre_2027_days ÷ investment_days) post_2027_gain = effective_net_gain × (post_2027_days ÷ investment_days) // Then apply regime to each component separately: pre_2027_taxable = pre_2027_gain × 0.5 // 50% discount post_2027_taxable = post_2027_gain − CPI_uplift // see section 6

For PPOR-converted properties (those that started as a main residence and were later rented out): the main residence exemption is applied first, reducing the effective net gain to the investment period only. The pre/post-2027 split is then calculated relative to the rental start date, not the purchase date. Applying the split to the purchase date would incorrectly include the exempt PPOR years in the 50% discount period.

Important uncertainty: The ATO has not yet published the official apportionment formula or whether an independent valuation as at 1 July 2027 can be used instead. A formal market valuation at that date would likely produce a better result for properties that grew strongly before 2027. GetReal's pro-rata estimate may therefore be conservative — your actual tax bill could be lower if you obtain a valuation. The ATO's guidance, when published, is the authoritative source.

New residential dwellings that genuinely add to housing supply are exempt from the 2027 changes and retain the 50% discount in full. The ATO definition of a qualifying new dwelling is not yet published (it will be set by legislative instrument). GetReal flags this in the result when you indicate your property may qualify.

4. Why we use pro-rata days, and what that uncertainty means

Pro-rata time apportionment assumes property values grew at a constant rate throughout the ownership period. That is almost certainly not true — property prices are uneven, responding to market cycles, renovations, and local conditions. Using days as the measure is a simplification.

The consequence: if your property grew more in value before 2027 than after (which is likely for many established properties, given strong pre-2026 price growth), the actual pre-2027 gain fraction is higher than the time fraction suggests. A formal valuation as at 1 July 2027 would capture this, increasing the portion taxed at 50% discount and reducing the portion taxed under the new rules.

We use pro-rata because it is the only method that doesn't require a professional valuation. We flag the uncertainty prominently in the result. For any transaction where the numbers are material — i.e., you are actually planning to sell — obtain a formal 1 July 2027 valuation and a tax agent's advice before relying on any estimate.

5. Division 43 depreciation and the cost base

If you engaged a quantity surveyor for a depreciation schedule, your accountant has been claiming Division 43 (capital works / building allowance) deductions each year — typically around 2.5% of the original construction cost of the building (not the land or purchase price).

Under ITAA 1997 s.110-45(4), every dollar of Division 43 depreciation you have claimed reduces your cost base by the same amount. This is not a penalty — it is the ATO recapturing the tax benefit of the deductions you already received. The effect is that your taxable capital gain is higher than you might expect from the raw numbers.

Example — Div 43 effect on cost base

Purchase price (2018) $700,000 Capital improvements $50,000 Gross cost base $750,000 Div 43 claimed over 8 years $56,000 (8 × $7,000 approx) ───────────────────────────────────── Adjusted cost base $694,000 If you only compared purchase vs sale, you might estimate: Sale $1,050,000 − Purchase $700,000 = $350,000 gain Actual gross gain: $1,050,000 − $694,000 = $356,000 — $6,000 higher due to Div 43

Your depreciation schedule from your quantity surveyor will show the cumulative depreciation claimed to date. If you are unsure of the amount, GetReal will treat it as $0 and flag in the result that your actual gain may be higher. Entering the correct figure gives a more accurate result.

Division 40 plant and equipment (carpet, ovens, air conditioners, etc.) is different from Division 43 and is not modelled in this tool. Division 40 depreciation is not a cost base reduction in the same way; instead, when you sell the property, any plant you claimed depreciation on is treated separately. This is a further reason to review your calculation with a tax agent before settlement.

6. CPI indexation — how it works post-2027

From 1 July 2027, the cost base for the post-2027 portion of any gain is indexed by CPI. This means only the real (above-inflation) gain is taxed. If property prices merely kept pace with inflation, the post-2027 gain would be zero.

// CPI indexation of the cost base (post-2027 portion only) indexed_cost_base = cost_base × (CPI_at_sale ÷ CPI_at_july_2027) real_gain_post_2027 = post_2027_gain − (indexed_cost_base − cost_base) = post_2027_gain − CPI_uplift // CPI uplift = cost_base × ((CPI_at_sale / CPI_at_july_2027) − 1) // When sale is in the future, CPI at sale is estimated using assumed_cpi_pct

For past sales (where the sale date is before the current quarter), GetReal uses actual ABS CPI index numbers from the cpi_quarterly table — ABS All Groups CPI, weighted average of eight capital cities (series A2325846C).

For future sales, the CPI rate from July 2027 to your sale date must be estimated. GetReal defaults to 2.5% annual — the midpoint of the RBA's 2–3% target band. You can adjust this in the calculator. A higher assumed CPI means more of your gain is sheltered from tax.

CPI data is sourced from the ABS Data API and updated quarterly. Data vintage is shown in the result screen. ABS releases quarterly CPI data in the last week of January, April, July, and October.

7. The 30% minimum tax — who it applies to

The post-2027 regime does not use the 50% discount. Instead, the real (CPI-indexed) gain is subject to a 30% minimum tax rate. This means:

If your marginal tax rate is above 30%, you pay 30% on the post-2027 real gain (not your full marginal rate)
If your marginal tax rate is below 30%, you pay your marginal rate (the 30% minimum does not apply upward)
At low income levels, a capital gain can push you into the 30% band even if your base income is lower

post_2027_tax_rate = max(marginal_rate, 0.30) // Exceptions: // — New residential dwellings: 50% discount applies instead (if property qualifies) // — Superannuation funds (not individuals): different rates apply, not modelled here

Superannuation fund exception: SMSFs in pension phase currently pay 0% CGT; in accumulation phase they pay 15% with a 33.33% discount (rather than 50%). These rates are different enough that a separate calculator is required. This tool is for individual investors only.

Low income and the 30% floor: The 30% minimum applies even if your other income is very low. This is relevant for retirees or those taking a year off — the assumption that a low-income year is a good time to sell investment property is less true post-2027 than under the old rules.

8. Data sources and version dates

Data	Source	Vintage	Update cadence
Income tax brackets	ATO — Tax rates for residents	2026–27 financial year	Annual (each May Budget)
Medicare Levy	ATO — Medicare Levy	2% standard rate (2026–27)	Annual
Medicare Levy Surcharge	ATO — MLS thresholds	2026–27 thresholds ($93,000 / $108,000 / $144,000)	Annual
CPI — historical quarters	ABS Data API · Series A2325846C (All Groups, 8 cities)	Updated to latest published quarter	Quarterly (Jan / Apr / Jul / Oct)
CPI — future periods	RBA target midpoint (2.5%)	User-adjustable in calculator	—
CGT legislation	Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Royal Assent 26 June 2026	As enacted	Monitored — methodology updated if ATO publishes formal apportionment guidance
Division 43 (Subdiv 43-B)	ITAA 1997 s.43-70 and s.110-45(4)	Current	—

Tax bracket data is stored in the income_tax_brackets Supabase table. CPI index values are stored in cpi_quarterly. Both are used by the /api/v1/cgt Cloudflare Function that powers the calculator. The data vintage shown in your result screen reflects what was in the database at the time of your calculation.

9. What this tool does not cover

GetReal is built to handle the most common investment property CGT scenario for individual Australian residents. The following situations are not modelled and you should seek professional advice before relying on any estimate for them.

SMSF properties — CGT rates and discount percentages are different for self-managed super funds. This tool is for individuals only.
Partial main residence exemption — If you lived in the property before renting it out, a proportional CGT exemption applies (ITAA 1997 s.118-185). We support the PPOR-converted path (lived-in then permanently rented), but the calculation is still conservative — the six-year absence rule (s.118-145) is not modelled, and complex mixed-use histories (moved in and out multiple times) are flagged as out of scope.
Six-year absence rule — If you rented your home while living elsewhere and returned within six years, you may be eligible for a full or partial main residence exemption for that rental period. This requires separate advice.
HECS / HELP repayment — Capital gains count as income for HECS repayment calculations. A large gain in a single year can trigger significant compulsory HECS repayments that the CGT result does not include. This tool flags when you have HECS debt but does not calculate the repayment.
Foreign residents — Australian non-residents for tax purposes have different CGT rules, including no access to the 50% discount from May 2012. This tool assumes Australian tax residency throughout the ownership period.
Company and trust ownership — CGT concessions and rates differ for companies (no 50% discount) and trusts (flow-through depends on beneficiary). This tool covers direct individual ownership only.
Pre-CGT assets — Properties acquired before 20 September 1985 are exempt from CGT. This tool does not apply to pre-CGT assets.
Division 40 plant depreciation recapture — Depreciation on plant and equipment (carpets, appliances) is treated differently from Division 43 at sale. Not modelled.
Formal 1 July 2027 market valuations — If you obtain an independent market valuation as at 1 July 2027, the Subdiv 112-E election may allow you to use this instead of pro-rata days, potentially reducing your tax. This tool cannot use valuation figures — you would need a tax agent to run this calculation.

This is the coverage profile for v1. The partial main residence and six-year absence rule are on the roadmap.

10. Disclaimer

GetReal is an informational tool. Nothing produced by this calculator is tax advice, legal advice, or financial advice. The figures are estimates based on inputs you provide and the data sources described above.

CGT calculations involve many factors specific to your circumstances that this tool cannot assess — including your full income picture, the complete history of the property, depreciation schedules, prior year losses, foreign income, and superannuation considerations. The actual CGT payable on your property sale may differ materially from any estimate produced here.

Before making any decision based on these figures, consult a registered tax agent or accountant. You can find a registered tax agent at tpb.gov.au/public-register or via the ATO's Find a tax agent tool.

→ Use the CGT impact calculator