Your Investment Property Gained $200K. Here's How Much You Actually Keep.

Let me ruin your day with some maths.

You buy an investment property for $600,000. Three years later, it's worth $800,000. You sell.

Capital gain: $200,000. Nice, right?

Now let's calculate what you actually take home.

Buying costs (when you purchased):

• Stamp duty: $600,000 x 5.5% = $33,000 [1]

Selling costs:

• Agent commission: $800,000 x 1.5% = $12,000
• Conveyancing (both transactions): $4,000

Total transaction costs: $49,000

Adjusted capital gain: $200,000 - $49,000 = $151,000

Held for more than 12 months, so the 50% CGT discount applies. Taxable capital gain: $151,000 / 2 = $75,500

Now add that to your personal income. If you're on $80,000 salary:

• Normal tax on $80,000: $14,788 [2]
• Tax on $80,000 + $75,500 = $155,500: $38,688
• Additional tax from the capital gain: $38,688 - $14,788 = $23,900

Net profit after all costs and tax: $151,000 - $23,900 = $127,100

Effective take-home rate: $127,100 / $200,000 = 63.6%

You made $200,000 on paper. You kept $127,100 in reality. The government, the agent, the conveyancer, and the state revenue office took $72,900 — more than a third of your profit.

The real tax rate on property gains (it's worse than you think)

The effective CGT rate depends on your marginal tax bracket, and this is where it gets nasty.

If your income is $80,000, you're in the 32.5% marginal bracket for income between $45,001 and $120,000. But the capital gain pushes part of your income into the 37% bracket ($120,001-$180,000) and potentially the 45% bracket (above $180,000) 2.

So the capital gain isn't taxed at a flat rate. It's stacked on top of your existing income and taxed at progressively higher rates. The more you earn, the more the gain costs you.

Let me run the same scenario for different income levels:

Earner on $60,000:

• Normal tax: $9,967
• Tax on $60,000 + $75,500 = $135,500: $29,138
• Additional CGT: $19,171
• Net profit: $131,829 (65.9% kept)

Earner on $120,000:

• Normal tax: $29,467
• Tax on $120,000 + $75,500 = $195,500: $52,138
• Additional CGT: $22,671
• Net profit: $128,329 (64.2% kept)

Earner on $180,000:

• Normal tax: $51,667
• Tax on $180,000 + $75,500 = $255,500: $85,588
• Additional CGT: $33,921
• Net profit: $117,079 (58.5% kept) [3]

The higher your income, the less of your capital gain you keep. A high-income earner on $180,000 keeps only 58.5 cents of every dollar of capital gain. The ATO takes 41.5 cents.

This is why selling investment property is often the worst way to access your equity.

Strategy 1: Don't sell — refinance instead

The most tax-efficient way to access property equity is to not sell the property at all.

Refinancing allows you to draw equity from a property that has appreciated in value, without triggering a CGT event. The bank revalues the property, increases your loan, and gives you the difference as cash.

Using the same example:

• Purchase price: $600,000
• Current value: $800,000
• Original loan (80% LVR): $480,000
• Current LVR: $480,000 / $800,000 = 60%

You can refinance up to 80% LVR:

• New loan: $800,000 x 80% = $640,000
• Cash released: $640,000 - $480,000 = $160,000

That $160,000 comes to you tax-free. It's not income. It's debt. You pay interest on the additional $160,000, but if you use it to purchase another investment property, that interest is tax-deductible 4.

Compare the outcomes:

• Selling: $127,100 in your pocket after $72,900 in costs and tax
• Refinancing: $160,000 in your pocket, zero tax, and you still own the original property that continues to appreciate

Refinancing wins on every metric. More cash. Less tax. Continued ownership. Continued rental income. Continued capital growth.

The only reason to sell is if the property is underperforming and the capital can be deployed more productively elsewhere. Even then, I'd run the tax calculation first to see whether the redeployment benefit exceeds the CGT cost.

Strategy 2: Hold for the primary residence exemption

If you've lived in the property as your primary residence before converting it to an investment, the 'six-year rule' can shelter part or all of the capital gain from tax.

Under the main residence exemption, your primary residence is CGT-free when you sell. If you move out and rent it out, you can treat it as your main residence for up to six years, provided you don't claim another property as your main residence during that period 5.

Practical application: live in a property for two years, convert it to an investment, rent it out for up to six years, then sell. The entire capital gain during the ownership period — including the rental years — is CGT-free.

The savings on a $200,000 gain: the full $23,900 in CGT is eliminated. Your take-home goes from $127,100 to $151,000. That's a 19% increase in net profit from a single planning decision.

This strategy requires forward planning. You need to have genuinely lived in the property (address on your driver's licence, bank statements, electoral roll). The ATO audits these claims regularly 6.

But for investors who start with a property they live in and later convert it, the six-year rule is one of the most powerful tax concessions in the Australian system.

Strategy 3: Use a family trust structure

For investors building portfolios of three or more properties, a family trust (discretionary trust) can significantly reduce the CGT burden.

A family trust allows the trustee to distribute capital gains to beneficiaries in the most tax-efficient way. If one beneficiary has a low income (a spouse who works part-time, an adult child studying), the capital gain can be allocated to them and taxed at their lower marginal rate 7.

Example: instead of stacking the $75,500 taxable gain on top of your $120,000 salary (effective additional tax: $22,671), you distribute the gain to a beneficiary earning $25,000.

• Beneficiary's normal tax on $25,000: $832
• Tax on $25,000 + $75,500 = $100,500: $21,093
• Additional CGT: $20,261

That's $2,410 less tax than if you'd kept the gain yourself. On larger gains or multiple properties, the savings compound substantially.

The setup cost for a family trust is approximately $2,500-$4,000, with annual compliance costs of $1,500-$2,500 8. For a portfolio generating capital gains, the trust pays for itself within the first transaction.

Our high-net-worth clients typically structure their third or fourth property through a family trust. One client — Ann, who's purchased four properties through our team — moved her latest acquisition into a family trust specifically to manage future land tax and CGT exposure across the portfolio 9.

The key takeaway: selling an investment property without considering the tax structure first is leaving money on the table. Refinance if you can. Claim exemptions if they apply. Structure through a trust if the portfolio warrants it.

The $200,000 gain looks great on your property report. What matters is the number that hits your bank account.