Capital Gains Tax on Queensland Property: What to Check Before You Sell

Selling a property in Queensland can trigger Capital Gains Tax, but CGT is often misunderstood. It is not a separate Queensland tax. It is part of Australia’s federal income tax system and is generally assessed when you dispose of a CGT asset, including real estate, shares, business assets or investment interests.

For Queensland property owners, the practical issue is not only “how much CGT will I pay?” The more important question is whether the sale has been structured, documented and timed correctly before the contract is signed.

This guide explains how CGT works when selling Queensland property, what costs may form part of the cost base, when the CGT event usually happens, how the main residence exemption may apply, and why legal and accounting advice should be obtained before committing to a sale.

Ensure Legal assists clients with commercial property transactions, Queensland conveyancing and property contract review, property development matters, foreign investment and FIRB applications, and business purchase and sale transactions.

Quick Answer: How Is CGT Calculated?

In simple terms, a capital gain is usually calculated by comparing what you receive from selling the asset with what it cost you to acquire, hold and dispose of that asset.

Basic CGT formula

Capital proceeds − cost base = capital gain or capital loss

If you are eligible, capital losses and CGT discounts may then reduce the amount included in your taxable income.

The final tax payable depends on your taxable income, residency status, ownership structure, asset type, timing, available concessions and whether the property was used as your home, rental property, business premises or development asset.

CGT Is Federal, Not Queensland State Tax

A common misconception is that Queensland has its own Capital Gains Tax. It does not. CGT is administered federally through the Australian Taxation Office.

However, Queensland property transactions can still involve separate state-based costs and obligations, including:

• transfer duty when property is acquired;
• Additional Foreign Acquirer Duty for certain foreign buyers;
• Queensland land tax;
• foreign land tax surcharge for some foreign entities;
• local government rates and charges;
• body corporate levies, if the property is part of a community titles scheme.

These Queensland costs are not the same as CGT, but they may affect the overall commercial outcome of a sale, acquisition or restructure.

When Does the CGT Event Happen?

For most property sales, the CGT event occurs when the sale contract is entered into, not when settlement occurs.

This can matter significantly around 30 June. For example, if a contract is signed in June but settlement occurs in July, the capital gain may need to be reported in the earlier income year. Sellers should check the timing before signing the contract, especially where they are trying to manage taxable income across financial years.

Step 1: Work Out the Capital Proceeds

Capital proceeds are generally what you receive, or are entitled to receive, from the sale or disposal of the asset.

For a Queensland property sale, this usually includes the contract sale price. However, the position may be more complex if:

• the property is transferred between related parties;
• the property is gifted or sold below market value;
• there is a development agreement or staged settlement;
• the seller receives non-cash consideration;
• the transaction involves business assets, plant, equipment or goodwill;
• the property is compulsorily acquired;
• insurance or compensation proceeds are received.

Before signing, the contract should clearly record what is being sold, what is included in the sale price, and whether any part of the transaction relates to non-property assets.

Step 2: Work Out the Cost Base

The cost base is not limited to the original purchase price. For property, it may include a number of acquisition, ownership and disposal costs, depending on the circumstances.

Care is required because some expenses cannot be counted twice. For example, if an expense has already been claimed as a tax deduction, it may not be available to increase the cost base. Sellers should confirm this with their accountant or tax adviser.

Step 3: Calculate the Capital Gain or Loss

After identifying the capital proceeds and cost base, the basic calculation is straightforward:

Capital proceeds minus cost base equals capital gain or capital loss.

If the result is positive, there may be a capital gain. If the result is negative, there may be a capital loss. A capital loss generally cannot be used to reduce salary, business income or rental income. It is usually carried forward and applied against future capital gains.

Step 4: Apply Capital Losses and Discounts

If you have capital losses, they are generally applied against capital gains before the CGT discount is applied.

For Australian tax residents, the CGT discount may reduce the taxable capital gain if the asset has been held for at least 12 months. In broad terms:

• individuals may be eligible for a 50% CGT discount;
• some trusts may be eligible for a 50% CGT discount;
• complying superannuation funds may be eligible for a 33.33% discount;
• companies are generally not entitled to the CGT discount.

The rules can differ for foreign residents, temporary residents, trusts, companies, deceased estates, SMSFs and mixed-use assets. The ownership structure should be checked before the sale contract is signed.

Worked Example: Queensland Investment Property

Assume a Brisbane investor purchased an investment townhouse for $620,000 and later sold it for $820,000.

If the investor also has a $10,000 capital loss from another asset, the gain may reduce to $108,000 before any discount. If the investor is an Australian tax resident individual and has held the property for more than 12 months, the 50% CGT discount may reduce the taxable capital gain to $54,000.

That amount is then added to the investor’s taxable income and taxed at the applicable marginal tax rate.

Main Residence Exemption

Your main residence is generally exempt from CGT if it satisfies the relevant requirements. However, the exemption can become more complex where the property has been rented out, used for business, used partly as a home and partly to produce income, or owned through a company or trust.

Issues that commonly need review include:

• whether the property was genuinely your main residence;
• whether you moved in as soon as practicable after acquisition;
• whether the property was ever used to produce income;
• whether the six-year absence rule may apply;
• whether only a partial exemption is available;
• whether a market valuation is needed;
• whether the land size exceeds the exemption rules;
• whether the seller was an Australian tax resident for the relevant period.

For homeowners, the main residence exemption is often the most important CGT issue. It should be checked early, not after settlement.

Rental Properties and Investment Properties

Rental properties are usually subject to CGT when sold unless a full exemption applies. The calculation may be affected by how long the property was rented, whether it was previously a main residence, whether it was renovated, and whether deductions have already been claimed.

Records are critical. Sellers should collect:

• purchase contract and settlement statement;
• transfer duty records;
• legal and conveyancing invoices;
• loan and mortgage records;
• renovation and capital improvement invoices;
• depreciation schedules;
• rental statements and property management records;
• sale contract and settlement statement;
• agent commission and advertising invoices;
• valuation reports where required.

Companies, Trusts and SMSFs

The CGT outcome may change significantly depending on who owns the property.

Individual owners

Individual Australian tax residents may be eligible for the 50% CGT discount if the asset has been held for at least 12 months. Main residence exemption issues may also arise where the property was used as a home.

Company owners

Companies are generally not entitled to the 50% CGT discount. However, companies may be used for commercial, asset protection, development or business reasons. The tax outcome should be assessed before the transaction is structured.

Trust owners

Trusts can be useful in property investment and family asset structuring, but CGT treatment depends on the trust deed, beneficiary entitlements, distribution decisions and compliance with trust tax rules. A trust deed review may be necessary before sale.

SMSF owners

Superannuation funds have their own tax rules. If an SMSF owns property, the sale must be considered with the fund’s investment strategy, borrowing arrangements, related-party rules and superannuation compliance obligations.

Commercial Property and Business Assets

Commercial property transactions often raise additional issues beyond a simple residential investment sale.

For example, a commercial property sale may involve:

• GST treatment;
• going concern issues;
• tenanted property disclosures;
• lease assignment or tenant consent;
• outgoings adjustments;
• plant and equipment allocation;
• business goodwill;
• depreciating assets;
• small business CGT concessions;
• entity restructuring before sale.

Where the transaction includes both land and business assets, the contract should clearly allocate what is being sold. Poor allocation can create uncertainty for CGT, GST, transfer duty, depreciation and settlement adjustments.

Small Business CGT Concessions

If the property or asset is connected with a small business, small business CGT concessions may be relevant. These concessions can be valuable, but they are not automatic.

Potential concessions may include:

• 15-year exemption;
• 50% active asset reduction;
• retirement exemption;
• rollover relief.

Eligibility depends on detailed requirements, including ownership, active asset use, turnover or net asset value tests, connected entities and the timing of the transaction. Sellers should obtain accounting and legal advice before signing a contract or restructuring ownership.

Foreign Residents and FIRB Issues

Foreign owners and temporary residents may face different CGT outcomes. The main residence exemption and CGT discount rules may not apply in the same way. Foreign resident capital gains withholding may also be relevant in some property transactions.

Separately, Queensland property ownership by foreign persons may raise Additional Foreign Acquirer Duty, land tax surcharge and FIRB issues. These are not CGT rules, but they may significantly affect the net result of a transaction.

For assistance with foreign investment issues, see our Foreign Investments and FIRB Applications service page.

Common CGT Mistakes When Selling Queensland Property

• assuming CGT is calculated only on the difference between purchase price and sale price;
• forgetting to include transfer duty, legal fees and capital improvement costs in the cost base;
• mistaking settlement date for the CGT event date;
• assuming the main residence exemption always applies;
• not keeping records of renovations and improvements;
• claiming the same expense twice;
• selling through the wrong entity without checking tax consequences;
• failing to consider GST on commercial property;
• forgetting foreign resident capital gains withholding issues;
• signing a contract before checking timing, structure and tax advice.

Legal Checks Before Signing a Sale Contract

Although your accountant will usually calculate the tax outcome, your lawyer plays an important role in making sure the transaction documents support the intended commercial and tax position.

Before signing a sale contract, sellers should check:

• Is the seller name correct?
• Is the ownership structure clear?
• Is the contract date commercially acceptable from a CGT timing perspective?
• Does the sale involve land only, or also plant, equipment, goodwill or business assets?
• Does the contract correctly deal with GST?
• Are there leases, licences or occupancy arrangements?
• Are settlement adjustments clearly addressed?
• Are there foreign resident withholding obligations?
• Are there Queensland duty or surcharge issues?
• Are there development approvals, easements, encumbrances or planning issues affecting value?
• Should the seller obtain a valuation before sale?
• Should the sale be delayed, restructured or made conditional on tax advice?

How Ensure Legal Can Help

Ensure Legal does not replace the role of your accountant or registered tax adviser. However, we can assist with the legal and transactional parts of the sale so that the contract, structure and completion process are properly managed.

We assist with:

• reviewing Queensland property sale contracts;
• advising on contract structure before signing;
• commercial property sale and acquisition matters;
• business asset sale and purchase contracts;
• foreign investment and FIRB issues;
• GST and going concern contract clauses;
• trust, company and entity transaction documents;
• settlement coordination and completion documents;
• working with accountants and tax advisers before completion.

For Property Sellers

We can review the sale contract before signing and help identify legal issues that may affect timing, structure, settlement and transaction risk.

Review your property contract

For Commercial Property Owners

We can assist with commercial sale contracts, lease issues, due diligence, GST clauses, going concern treatment and settlement coordination.

Get commercial property advice

Frequently Asked Questions

Is Capital Gains Tax a Queensland tax?

No. CGT is part of Australia’s federal income tax system. Queensland may impose separate state taxes or duties, such as transfer duty, land tax or Additional Foreign Acquirer Duty, but these are different from CGT.

Do I pay CGT when I sell my home in Queensland?

If the property was your main residence and all exemption requirements are satisfied, you may be fully exempt from CGT. If the property was rented, used for business, owned by an entity, or only partly used as your home, the exemption may be reduced or unavailable.

Is CGT calculated from the settlement date?

For most property sales, the relevant CGT event is connected to the contract date, not the settlement date. This can affect which financial year the capital gain is reported in.

Can I include stamp duty in my cost base?

Transfer duty paid when acquiring the property may form part of the cost base, subject to the applicable tax rules and whether it has already been claimed or treated elsewhere. You should confirm the calculation with your accountant.

Can renovation costs reduce CGT?

Capital improvement costs may form part of the cost base if properly documented and eligible. Repairs, maintenance and deductible expenses need separate review because not every expense can be added to the cost base.

Do companies get the 50% CGT discount?

Companies are generally not entitled to the 50% CGT discount. This is why ownership structure should be considered before acquiring, selling or restructuring property assets.

Can small business CGT concessions apply to a property sale?

They may apply if the property or asset satisfies the relevant active asset and small business concession rules. These concessions are complex and should be reviewed before the transaction is signed.

Do I need both a lawyer and an accountant?

Usually, yes. Your accountant or tax adviser should calculate the tax outcome. Your lawyer should review the contract, ownership structure, transaction documents, GST treatment, settlement conditions and legal risks.

Planning to Sell a Queensland Property?

Before signing a sale contract, it is important to understand the legal structure, timing, settlement mechanics and tax-sensitive issues that may affect the transaction.

Contact Ensure Legal for assistance with Queensland property contracts, commercial property transactions, business sales, foreign investment issues and coordinated legal support before settlement.

Contact Ensure Legal to discuss your property sale or commercial transaction.

This article provides general information only and does not constitute legal, financial or tax advice. CGT outcomes depend on your personal circumstances, ownership structure, tax residency, asset history and transaction documents. You should obtain advice from a qualified accountant, tax adviser and lawyer before signing a contract or completing a transaction.