Selling an investment property before or after work income ends
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Your work income ending does not make the sale of an investment property tax free. For an Australian resident individual, the taxable gain is added to your other income for the year you sign the sale contract.
A year with less other income can mean less tax on the gain, and different capital gains tax (CGT) rules apply from 1 July 2027.
On 16 October 2026, the choice between selling and keeping comes down to two amounts: the cash a sale leaves after the loan, selling costs and tax, and what the property would add to or take from your cash each year if you kept it.
Does selling after work income ends mean less tax?
It can, but a job ending is not a CGT exemption. The ATO treats capital gains tax as part of income tax, so the taxable gain is assessed alongside your other taxable income. Before work income ends that may include a full year of wages.
After it, wages may have stopped, but rent or other income can remain. What counts is the income for the whole financial year, not whether you are working on the day you sell.
From 1 July 2027 a 30% minimum tax can also apply to part of a gain, so less other income does not always lower the tax on it. The rules are in cost base indexation and the 30% minimum tax, and the capital gains tax calculator works one sale through.
Does the contract date or the settlement date count?
The contract date. The ATO's guide to selling your rental property, updated 22 June 2026, puts the CGT event at the day you enter into the contract, not at settlement. That day sets the financial year the gain belongs to.
Settling after your work income ends does not move an earlier contract into a later year, and a contract signed by 30 June 2027 uses the earlier rules even if settlement follows.
How much of the sale price becomes cash?
Less than the price. PropRetire's If sold page takes off the linked loan payout and the selling costs, then the estimated tax and any extra compulsory study loan repayment. What is left is the net cash from the sale.
- Loan payout: use the lender's figure for your settlement date. It can include fees and interest, so your last statement's balance may not match.
- Selling costs: agent and legal costs come off the cash. Use actual quotes.
- Tax: it depends on your other taxable income and the property's tax records.
At settlement the buyer holds back 15% of the price for the ATO unless you give them a clearance certificate. Australian residents are covered too, so ask for the certificate before the contract is signed. The post on clearance certificates has the rule.
Is the loan balance part of the capital gain?
No. Paying out the loan reduces your cash, but it does not set the gain. The gain is the sale proceeds less the cost base, which is what the property cost for tax purposes.
The cost base can include eligible buying and selling costs and capital improvements. Amounts already claimed as deductions cannot be counted again, and capital works deductions can lower it.
Co-owners report the gain by their ownership shares. The property tax and CGT estimates guide says which records PropRetire uses and when a missing one makes an estimate unavailable.
What does a sale a week either side of 1 July 2027 look like?
In our example, a house bought in June 2019 for $329,000 is held in one owner's name. The Stress test sells it under two contracts, a week either side of the new rules. Settlement follows each by a month.
| Contract 24 June 2027 | Contract 8 July 2027 | |
|---|---|---|
| Sale price | $691,258 | $692,679 |
| Selling costs | $17,281 | $17,317 |
| Loan paid out | $220,265 | $219,823 |
| Cash before tax | $453,711 | $455,539 |
| Rules for the gain | 50% discount on all of it | 50% discount to 1 July 2027, indexed after |
| Tax year the gain falls in | 2026-27 | 2027-28 |
The tax is where the dates matter. The June contract is taxed under today's rules, with the 50% discount on the whole gain.
For the July contract, the law treats the house as sold just before 1 July 2027 and bought back that day (section 112-155 of the Income Tax Assessment Act 1997, added by the Tax Reform No. 1 Act, made 26 June 2026).
The gain up to that day keeps the discount, and only the growth after it is indexed. So a week moved the year the gain is taxed in and the rules for the growth after the date. The other income in each year decides how much tax the gain adds.
What if the rental was once your home?
Its use history can change the tax a great deal. Having lived there does not automatically exempt the whole gain, and renting it out does not make the whole gain taxable.
Under the ATO's rules for a former home, an eligible owner can choose to keep treating it as their main residence for up to six years while it earns rent, or without limit while it does not.
The post on how long you can rent out your home has the detail.
If the home was fully exempt and first earned income after 20 August 1996, its market value on that day can become its starting value for CGT. The records to find are the move in and move out dates, the rental periods and any valuation from when renting began.
What happens to cashflow when the property is sold?
The rent stops, and so do the property's costs and the repayments on a loan that is paid out. Whether you have more or less cash each month depends on what was left of the rent after those payments. Keeping gives a continuing cashflow, which may need money from you.
Selling gives one lump sum. To compare them, use the same period, include the selling costs and tax, and allow for where the cash goes afterwards. What is left of the rent after costs? explains the ongoing side.
Where does the cash go after the sale?
Count the same money once, as cash to spend or as a debt repaid. Sale money held by a company or trust is not personal money, and PropRetire keeps that cash apart from the household's own.
Super has its own limits, and a property sale does not bypass them. What you can reach, and when covers access. A missing tax record makes the sale figure incomplete, not zero.