Step-by-step CGT calculation
Determine the CGT event date
The CGT event occurs on the date you exchange contracts, not the settlement date. If you sign a contract on 15 March 2027 and settle on 15 May 2027, your CGT event is 15 March 2027. This date determines which rules apply and whether you qualify for the 50% discount.
ATO reference: ITAA 1997 s104-10
Calculate your cost base
The cost base is the total of what you paid for the property plus eligible costs. It has 5 elements under the ITAA 1997: (1) Purchase price, (2) Incidental acquisition costs (stamp duty, legal fees, buyer's agent), (3) Non-capital costs of ownership (not applicable for rental properties), (4) Capital improvements, (5) Costs to establish, preserve or defend title.
Important: Deductible expenses (mortgage interest, management fees, repairs) are NOT in the cost base. They are claimed as deductions in the year incurred.
ATO reference: ITAA 1997 s110-25
Calculate capital proceeds
Capital proceeds are the total amount you receive for the property — typically the sale price. If you sell at arm's length (market value), this is straightforward. Deduct selling costs (agent commission, legal fees) to get your net proceeds.
ATO reference: ITAA 1997 s116-20
Calculate the gross capital gain
Gross capital gain = Capital proceeds − Cost base. If the result is negative, you have a capital loss, which can be offset against other capital gains in the same year or carried forward to future years.
ATO reference: ITAA 1997 s102-5
Apply the CGT discount (if eligible)
If you are an Australian resident individual, trust, or partnership, and you held the property for at least 12 months, you are entitled to the 50% CGT discount on gains accruing before 1 July 2027. This means only half the gain is added to your taxable income.
From 1 July 2027: For properties purchased after Budget night (12 May 2026), the 50% discount is replaced by CPI indexation. For grandfathered properties, the 50% discount applies to pre-cliff gains only.
ATO reference: ITAA 1997 s115-100
Add to taxable income and calculate tax
Add the discounted capital gain to your other taxable income for the year. Apply your marginal tax rate to the total. The capital gain is taxed at your marginal rate — it is not taxed separately. This is why the timing of a sale can matter significantly.
ATO reference: ITAA 1997 s102-5
Check for the main residence exemption
If the property was ever your main residence, a partial exemption may apply under s118-185. The exempt fraction is calculated as the proportion of your ownership period during which it was your main residence. ClearGain's Working Paper calculates this automatically.
ATO reference: ITAA 1997 s118-185
The 5 cost base elements
Under ITAA 1997 s110-25, the cost base of a CGT asset has 5 elements. For investment properties, elements 1, 2, 4, and 5 are most relevant.
| Element | What it covers | Examples | In cost base? |
|---|---|---|---|
| Element 1 | Purchase price | Contract price, deposit | Yes |
| Element 2 | Acquisition costs | Stamp duty, legal fees, buyer's agent, building inspection, loan establishment | Yes |
| Element 3 | Non-capital costs | Mortgage interest, council rates, insurance, management feesNOT in cost base for rental properties — claim as deductions instead | No |
| Element 4 | Capital improvements | New kitchen, bathroom renovation, extension, pool, new flooring | Yes |
| Element 5 | Title defence costs | Legal costs to establish, preserve or defend title | Yes |
Worked example
Property: 14 Toxteth Road, Glebe NSW
Purchased March 2021 for $1,780,000. Sold May 2027 for $2,480,000. Australian resident individual at 47% marginal rate.
Estimate only. Not financial advice. Actual figures depend on individual circumstances.
How the 2027 Budget changes affect the calculation
Properties purchased before Budget night (12 May 2026)
The calculation above applies in full. The 50% discount applies to gains accruing before 1 July 2027. For gains accruing after 1 July 2027 (if you hold past the cliff), CPI indexation applies to the post-cliff portion.
Properties purchased after Budget night
The 50% discount is replaced by CPI indexation. Your cost base is indexed by CPI, and you pay tax on the real (inflation-adjusted) gain at your marginal rate, subject to a 30% minimum. Negative gearing losses are quarantined against residential property income only.
New builds
You can choose between the 50% discount and CPI indexation. Full negative gearing continues.
Frequently asked questions
Generate your ATO-aligned Working Paper
ClearGain generates a step-by-step CGT Working Paper with all legislative references — the document your accountant needs at tax time.
Generate my Working PaperThis guide is for general information purposes only. Legislative references: ITAA 1997 s102-5, s104-10, s110-25, s115-100, s116-20, s118-185. ATO NAT 15246 Capital gain or capital loss worksheet. Always seek advice from a registered tax agent.