How to Save on Capital Gains Tax When Selling Property Successfully
08 May 2025
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If you're like me, thinking about selling that sun-drenched villa abroad or parting with your seaside holiday home, the shock often comes after the sale. And that shock is tax. Specifically, Capital Gains Tax.
As an Australian resident, the Australian Taxation Office (ATO) expects you to report and, if necessary, pay CGT on any gains made from the sale of overseas property.
But here's what I've learned, there are ways to legally reduce or even avoid paying CGT. I've spent time researching and speaking with professionals to figure out what works and what traps to avoid. Working with a tax accountant was one of the best decisions I made to navigate the rules confidently.
Let me walk you through how I saved on CGT and how you might be able to as well.
Capital Gains Tax (CGT) is the tax you pay on the profit when you sell an asset, such as a property. You are only taxed on the capital gain, not the full sale price. The capital gain is calculated by subtracting your cost base (what you paid for the property, plus eligible costs) from the final sale price.
When it comes to foreign property, the rule is the same. If you're an Australian resident for tax purposes, the ATO treats you as liable for CGT on global assets, not just those held in Australia.
So yes, whether it's a holiday home in Bali, a Paris apartment, or a flat in New York, once it's sold for a profit, that gain becomes subject to CGT in Australia.
If you've already paid tax in the country where the property is located, you might be eligible for a foreign income tax offset. This can reduce your CGT in Australia. However, the gain still needs to be reported on your Australian tax return for the year the sale occurred.
I used to think it all came down to whether I had an Aussie passport or visa. But that's not really how it works.
The ATO generally considers you a tax resident of Australia if:
If you meet any of these conditions, then CGT applies to your worldwide income, including profits from selling foreign property.
To keep track of my property expenses and capital improvements across countries, I rely on The Property Accountant's software, which makes reporting at tax time far less stressful.
For more clarification on your status, the ATO's general CGT page is a helpful resource.
Everything must be calculated in Australian dollars, no matter where the property is located. Here's how I typically break it down:
This gain is then added to my taxable income for the year. If it were a loss, it could be used to offset other capital gains.
For rental properties, the ATO outlines specific CGT rules, including depreciation and improvements.
If you've paid tax on the property overseas, you may be entitled to a foreign income tax offset through a Double Taxation Agreement (DTA). Australia has DTAs with many countries to prevent being taxed twice on the same gain.
For one of my properties in France, the local tax paid was used to reduce my CGT obligation in Australia, provided I kept evidence such as receipts and local tax returns.
Certain expenses can be added to your cost base, including:
I learned early on to keep every invoice, including those from renovation work, tracked inside my accounting system.
Routine repairs like plumbing or repainting don't count, only capital improvements do.
This one saved me thousands. If I've held the property for more than 12 months and I'm an Australian resident, I can typically claim a 50% CGT discount. This means only half the gain is added to my assessable income.
The discount doesn't apply if the property is owned by a company, or if I was a non-resident when I acquired it after 8 May 2012.
If the property was your home before being rented out, the main residence exemption might allow you to reduce or eliminate CGT. The 6-year rule lets you treat the property as your main residence for CGT purposes while it's rented, for up to six years.
Mark owned and lived in a townhouse in Sydney for five years before relocating overseas for work. He began renting out the property but did not nominate any other residence as his main home.
Four years later, he sold the townhouse while still overseas. Because he met the criteria under the 6-year rule, the capital gain from the sale was fully exempt from CGT.
Emma bought a unit in Brisbane and lived there as her main residence for two years. She then moved in with her partner but kept the unit and started renting it out. After six years and three months of renting, she decided to sell the property.
Because the rental period exceeded the 6-year limit and she had not sold it within that timeframe, only the first six years of the capital gain could be exempt under the main residence rule. The remaining three months were subject to CGT, calculated on a proportional basis.
Yes, and understanding this could influence how you structure your investments.
| Structure | CGT Discount | Tax Rate | Notes |
|---|---|---|---|
| Individual | Yes | Marginal rate | Must meet holding conditions |
| SMSF | No | 15% (or 0% in pension phase) | Special superannuation treatment |
| Trust | Yes (distributed to beneficiaries) | Varies | Taxed in the beneficiaries' hands |
| Company | No | 25%-30% | Cannot access the 50% discount |
Timing matters. CGT is added to your income, so I try to sell when I know I'll have lower earnings, for example, during a sabbatical or gap between jobs.
I also use capital losses from shares or crypto to offset gains. One year, I had a $25,000 share loss that substantially reduced the CGT from my property sale.
Yes, and the rules differ.
If I inherit a property, CGT applies only when I sell it. The cost base is the market value on the date of death, not what the deceased originally paid.
If I gift a property, the ATO considers it a sale at market value, even though no money changed hands.
I even considered moving overseas as a way of avoiding CGT. But it's not quite that easy. To be a non-resident for tax purposes, I'd have to sever most of my connections with Australia. That involves:
Only then could I escape Australian CGT. A few nations, such as Singapore, New Zealand, and Monaco, do not charge CGT whatsoever. But if I remain an Australian tax resident, CGT comes with me, even if I'm relaxing on a beach in Portugal.
You can report CGT via myTax or a tax agent. You'll need:
I store receipts, exchange rate records, and renovation documents in one place so nothing gets missed.
CGT is complex, and I found out the hard way that making a mistake could cost me thousands. Reporting incorrectly, missing deductions, or overlooking tax obligations in another country can result in penalties, interest, or even an audit by the ATO.
Australia is part of the OECD Common Reporting Standard. This means financial institutions overseas can share property sale information with the ATO. Even if the property is located abroad, the ATO may still find out about the transaction.
This is why I eventually turned to tax experts. They helped clarify my obligations, ensured everything was reported properly, and saved me from losing money unnecessarily. It was one of the best decisions I made.
If you realise you've made a mistake, it's better to fix it early. Making a voluntary disclosure is far safer than waiting to be contacted by the ATO.
Getting CGT right isn't always straightforward. Small errors can lead to penalties, missed deductions, or overpaid tax.
The checklist below highlights the most common CGT mistakes and what you should do instead.
| Mistakes | What To Do Instead |
|---|---|
 Didn't claim all deductible expenses |  Track Claim legal fees, stamp duty, agent costs, and capital improvements |
Missed the 50% CGT discount due to residency status | Ensure you're an Australian tax resident and held the property for 12+ months |
Ignored available capital losses | Offset losses from shares, crypto, or other property against your capital gains |
Assumed inherited or gifted property was CGT-free | Confirm whether CGT applies and know the cost base (usually market value at transfer Or date Of death) |
Didn't keep receipts or supporting docs | Maintain records for renovations, sale contracts, valuations, and tax paid overseas |
For more, I found this article helpful on mistakes property investors should avoid.
If you're not sure where you stand, check out this capital gains tax calculator for property.
Q: What's the capital gains tax rate on overseas property?
There isn't one. The profit is included as part of my income and taxed at my marginal tax rate. I may qualify for the 50% discount if I've owned the property for over 12 months.
Q: If I sell a house abroad, do I pay tax in Australia?
Yes, if I'm a resident for tax purposes. But if I pay tax in a foreign country, I may be able to claim an offset.
Learning how to reduce or avoid CGT on foreign property has saved me more than just money, it's saved me a lot of stress too.
Don't leave it until the last minute. Plan ahead. And if it becomes too complex, reach out to a property tax accountant who understands international rules.
With the right support, CGT doesn't have to cost you more than it should.
