Question 1

What is a CGT event and when does it apply to property?

Accepted Answer

A CGT event happens when you dispose of an asset — typically by sale, but also gift, transfer, or destruction. For property, the CGT event date is generally the contract date, not settlement. The capital gain (or loss) is the proceeds less the cost base (purchase price plus stamp duty, legal fees, buyers agency fees, capital improvements and selling costs).

Question 2

How does the main residence exemption work?

Accepted Answer

Your principal place of residence is generally exempt from CGT for the period it was your home. To qualify it must have been genuinely your residence (you moved in soon after settlement). Partial exemption applies if it was your home for only part of the ownership period, or if it was used to produce income.

Question 3

What is the 6-year CGT rule on the former main residence?

Accepted Answer

If you move out of your main residence and rent it out, you can continue to treat it as your main residence (for CGT purposes) for up to 6 years — provided you don't claim another property as your main residence in that time. If you move back in before 6 years and later move out again, the clock resets. Used strategically, this rule can preserve a full or partial CGT exemption on a property that's been rented for years.

Question 4

How does the 50% CGT discount work?

Accepted Answer

Individuals and trusts (but not companies) holding an asset for more than 12 months get a 50% discount on the assessable capital gain. So a $200k gain becomes $100k assessable, taxed at your marginal rate. Companies don't get the discount but pay the flat company tax rate. SMSFs in accumulation phase get a 1/3 discount; in pension phase the gain is generally tax-free.

Question 5

Division 40 vs Division 43 depreciation — what's the difference?

Accepted Answer

Division 43 covers the building structure (capital works) and is generally claimed at 2.5% per year over 40 years for residential buildings constructed after 17 July 1985. This applies regardless of who built it or when you bought it. Division 40 covers plant and equipment (carpets, blinds, dishwashers, air-con units, hot water systems, etc.). For residential investment properties, Division 40 deductions on second-hand assets were removed in 2017 — only brand-new items installed in a property you own as an investment can be claimed. Commercial property and brand-new residential are unaffected.

Question 6

Is a quantity surveyor's depreciation schedule worth getting?

Accepted Answer

For investment properties built after 1987, almost always yes. The schedule typically pays for itself many times over in the first year. Cost: usually $500–$800. Worth it for both Division 43 (still claimable on most buildings) and Division 40 (where applicable). The schedule is itself tax-deductible.

Question 7

How does land tax work and where are the thresholds?

Accepted Answer

Land tax is a state-imposed annual tax on the unimproved land value of investment property holdings above a threshold. Each state has different thresholds and rates: NSW threshold around $1M+, VIC much lower, QLD around $600k for individuals (with surcharges for non-individuals and absentee owners). Use our land tax calculator on Resources for state-specific estimates.

Question 8

Why does land tax aggregate across properties?

Accepted Answer

Most states aggregate the land value of all investment properties held by the same owner in that state — so two properties at $400k each are taxed as one $800k holding, often pushing you into a higher tax bracket. Holding properties across multiple states (rather than stacking in one), or in trust structures with separate trustees, can reduce aggregate land tax liability.

Question 9

How is stamp duty calculated and who pays it?

Accepted Answer

Stamp duty (transfer duty) is paid by the buyer on most property purchases. Calculated on a sliding scale by purchase price, with each state using different brackets. First home buyer concessions, off-the-plan concessions, and pensioner concessions vary by state. Foreign buyers usually pay an additional surcharge (typically 7–8%). Use our stamp duty calculator on Resources.

Question 10

How does the stamp duty bracket system actually work?

Accepted Answer

Stamp duty is a state-level tax charged as a percentage of the property's purchase price, structured in tiers similar to income tax — higher price brackets attract higher marginal rates. The amount also depends on buyer type: owner-occupier, investor, first home buyer or foreign purchaser are all treated differently. Most states give first home buyers a full or partial exemption below a price threshold. The exact formula and thresholds change regularly, so always verify with the relevant state revenue office or use our stamp duty calculator on the Resources page.

Question 11

Do first home buyers pay stamp duty in Australia?

Accepted Answer

It depends entirely on your state and purchase price. Most states give first home buyers either a full exemption or a sliding concession up to a price cap. As a general guide (always confirm with your state revenue office because thresholds shift): NSW typically full exemption to around $800,000 with a sliding concession up to $1,000,000; VIC full exemption around $600,000 with concession up to $750,000; QLD exempts established homes for first home buyers up to around $700,000 with new builds fully exempt; WA, SA, TAS, ACT and NT each run their own concession schemes with different caps and rules. Eligibility usually also requires Australian residency and an intention to occupy.

Question 12

Are there extra costs for foreign buyers?

Accepted Answer

Yes. Foreign buyers usually require FIRB (Foreign Investment Review Board) approval before purchase, pay an FIRB application fee, an additional state stamp duty surcharge (typically 7–8%), and an annual absentee owner land tax surcharge in most states. Foreign residents are also denied the main residence CGT exemption on disposal in many cases.

Question 13

When does GST apply to property?

Accepted Answer

Established residential property generally has no GST. New residential property and substantial renovations have GST built into the price (the buyer doesn't claim it back). Commercial property typically has GST, but registered buyers can claim input tax credits — and many transactions use the 'going concern' exemption to avoid GST altogether. Subdivision and small-scale development can also create GST exposure.

Question 14

What rental property expenses are deductible?

Accepted Answer

Generally deductible: loan interest, council rates, water, insurance, property management fees, repairs (not improvements), depreciation, body corporate fees, advertising for tenants, accountant fees, travel for inspections (limited rules), and pest control. Not deductible: capital improvements (added to cost base), stamp duty (added to cost base), and expenses for the period the property was unavailable for rent.

Question 15

What is a PAYG withholding variation and should I lodge one?

Accepted Answer

If you're negatively geared, you typically wait until tax time to receive your refund. A PAYG withholding variation (Section 15-15) lets you reduce the tax withheld from your salary throughout the year, improving cashflow. Worth doing if your negative gearing benefit is material and consistent. You lodge through your tax agent and renew annually.

Question 16

How do trust distributions work for property income?

Accepted Answer

Discretionary (family) trusts allow income and capital gains to be distributed to beneficiaries each year — useful for splitting income across family members on lower tax brackets. Distributions must be properly resolved each year. Land tax treatment of trusts varies by state and is generally less favourable than personal ownership. Always seek tax advice on trust setup and operation.

ThetaxandlegalsideofpropertyinAustralia.

Capital Gains Tax

Depreciation

Land tax & state taxes

GST & other taxes

Property Investor Tax Deduction Checklist

SMSF Property Starter Kit

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