Tax and CGT when selling geared properties

What Really Happens For Tax When You Sell Geared Properties

Selling geared investment properties can free cash and reduce risk, but it also triggers capital gains tax and other tax consequences. This quick guide shows how CGT is calculated, what records you need, how the 2027 rule changes bite, and practical steps to time sales and manage your tax bill.

14 Aug 2026Updated 27 Aug 2026Reviewed 21 Aug 20266 min read

Key Takeaway

Selling down geared properties in Australia triggers capital gains tax (CGT) on the sale price minus cost base, with interest, stamp duty and capital improvements typically included; from 1 July 2027, the 50% CGT discount is replaced by inflation indexation and a 30% minimum tax on real gains. Accurate records of purchase, holding costs and loan splits are critical. Investors should pre-plan which financial year each sale lands in and coordinate with their accountant and broker to minimise tax shocks and manage cashflow.

When you start selling down geared properties, the main tax issue is capital gains tax (CGT) on each sale, plus flow‑on changes to interest deductibility and your overall tax position. You’re taxed on the profit (sale price minus cost base and selling costs), with big rule changes from 1 July 2027 that generally increase tax on future gains.

Here’s a practical, decision‑ready rundown you can work through this week.

Simple CGT calculation beside house keys and laptop A clear CGT calculation is the backbone of any de‑gearing plan.

1. How CGT works when you sell a geared property

For most investors, CGT is calculated as:

Capital gain = sale proceeds − (cost base + selling costs − building write‑off already claimed).

Your cost base typically includes:

Purchase price and buyers’ agent fees.
Stamp duty and legal fees.
Capital improvements (kitchen reno, extensions, structural works).
Certain holding costs for land and new builds where not already deducted (ATO‑dependent).

For sales before 1 July 2027, individuals and most trusts can usually apply the 50% CGT discount if the property was held for at least 12 months.

From 1 July 2027, that 50% discount is replaced with inflation indexation and a minimum 30% tax on real gains for individuals (facts 1, 7–12).

Simple worked example (current rules)

Purchase: $600,000 in 2016.
Costs (duty, legals, reno): $50,000.
Sale: $900,000 in 2026.
Selling costs (agent, legals): $25,000.

Cost base = $650,000. Capital gain = $900,000 – $650,000 – $25,000 = $225,000.

Held >12 months, individual taxpayer: discounted gain = $112,500. This is added on top of your other income for that year.

If your marginal rate is 39% (inc. Medicare), tax on the gain is roughly $43,875.

Under the 2027 rules, more of that real gain will be taxed and at a minimum 30% rate, so the bill is generally higher for the same economic outcome.

2. The 2027 CGT reforms: why timing of sales matters

Budget 2026–27 and the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 change the game: 1. No more 50% discount for individuals and most trusts from 1 July 2027 (fact 7). 2. Real gains only will be taxed, using CPI indexation (facts 4, 5, 11, 12). 3. A minimum 30% tax on capital gains for residents, with limited exceptions (facts 1, 8, 10). 4. Pre‑CGT assets (bought before 20 September 1985) become partly taxable for gains accruing from 1 July 2027 (fact 13). Critically, the new rules **only apply…

Frequently asked questions

Do I pay CGT if I sell one investment property to pay down others?▾

Yes, selling any investment property generally triggers capital gains tax if you sell for more than your cost base. It doesn’t matter that the proceeds are used to pay down other loans. What matters is the profit on the property you sell and which financial year the contract date falls in. The way you then use the proceeds affects future interest deductibility, not the CGT on the sold property.

How long do I need to keep records for investment property CGT?▾

You should keep purchase, improvement, loan and rental records for at least five years after you dispose of the property, but in practice it’s safer to keep digital copies permanently. Many tax advantages, like adding capital improvements to your cost base, depend on being able to show invoices and contracts. Without them, your accountant may have to use conservative estimates, which usually means more tax.

Is it better to sell a geared property before or after 1 July 2027?▾

It depends on your situation, holding period and expected future growth. Before 1 July 2027, individuals can usually use the 50% CGT discount after 12 months, which often means a lower effective tax rate. After that date, the discount is replaced with inflation indexation and a 30% minimum tax on real gains. You and your accountant should model both regimes for each property before deciding on timing.

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