Updated October 2026
Contract for Sales | Seller’s Most Asked Questions 15
Ignoring tax obligations when selling a property can create unexpected liabilities and reduce the money available after settlement. For NSW sellers, the main issues include capital gains tax, land tax, GST and withholding requirements. The right treatment depends on ownership, tax residency, the property’s use and the timing of the transaction.
The 2026–27 Federal Budget reforms make early planning particularly important for long-held investments, including properties acquired before capital gains tax began. This article reflects the position checked on 19 October 2026 and distinguishes rules already operating from changes applying from 1 July 2027.
1 Check your capital gains tax position before signing
Capital gains tax is part of income tax on a net capital gain. It is not simply a percentage of the sale price. Your accountant should consider the cost base, eligible acquisition and selling expenses, improvements, losses and available exemptions or concessions.
A qualifying main residence can be exempt, but rental use, business use, foreign residency and other circumstances can affect eligibility. The ATO’s main residence guidance explains how some former homes can remain exempt. The CGT event for an ordinary completed sale generally occurs when the contract is entered into, rather than at settlement. Obtain advice before exchanging contracts, especially around 30 June.
The age of the building is not the same as your acquisition date. An inheritance, transfer between family members or change in ownership can affect the analysis. Give your adviser the full ownership history rather than relying on a family recollection that the property has always been tax free.
2 Understand the budget changes applying from July 2027
The Treasury Laws Amendment Tax Reform No 1 Act 2026 received Royal Assent on 26 June 2026. The core reforms are law, although their principal CGT application date is 1 July 2027.
As Treasury’s reform overview explains, the general 50% CGT discount for individuals and trusts is being replaced for post-transition gains by inflation-based cost-base indexation, subject to eligibility. A minimum 30% tax on relevant gains also applies, with exceptions including qualifying income-support recipients. Eligible gains accrued before the transition retain their existing treatment. The main residence exemption remains available.
Negative gearing changes also apply from 1 July 2027. Generally, losses on established residential investments acquired from 7.30 pm AEST on 12 May 2026 will be restricted to residential property income, with unused amounts carried forward. Earlier holdings are generally protected while retained. New-build concessions have separate eligibility rules.
Further implementation legislation was introduced on 14 October 2026. Proposed refinements should be distinguished from enacted provisions. Check the position again before committing to a sale or relying on a particular concession.
What changes for properties acquired before 1985
Properties acquired before 20 September 1985 are generally pre-CGT assets, subject to exceptions. Under section 112-175, qualifying assets held across the transition have their cost base reset from 1 July 2027. Earlier gains remain exempt, while later gains can become taxable. This does not create an immediate tax bill merely because the calendar changes.
The default reset uses market value immediately before 1 July 2027. The legislation also allows an authorised apportionment method. A defensible valuation helps establish the actual value separating the protected historical period from later growth. Ask your accountant and valuer to plan for the correct valuation date and retain supporting records.
Missing a contemporaneous valuation does not automatically remove the historical exemption. The apportionment choice is generally made with the return for the later realisation year. Apportionment estimates transition value; indexation adjusts eligible costs for inflation. They serve different purposes, and indexation is not necessarily worse in every case.
For a useful valuation, preserve photographs, plans, tenancy details and evidence of the property’s condition around the transition. Ask the valuer to identify the relevant interest being valued and explain the supporting market evidence. An informal selling estimate may not provide the same support as a properly reasoned valuation.
Christine on the tax surprise that nearly cost us a chair
I explained these changes to an elderly client who almost fell off their chair. They had always understood that buying before 1985 meant the property was safely outside capital gains tax. For a moment, I thought we might need to inspect the chair before we finished discussing the property.
That is the hidden tax surprise: the old purchase date will not necessarily protect every future gain. But there is an important reassurance. The gains built up before July 2027 remain protected, and an eligible family home can still be exempt. There is no reason to panic about a tax bill on forty years of growth.
My practical message is to get the records together and discuss a proper valuation for the transition. An old property deserves better than a guessed figure. I would much rather have that conversation calmly now than try to reconstruct decades of paperwork when everyone is rushing to sell.
3 Check NSW land tax and clearance requirements
NSW land tax is separate from CGT. The general threshold remains $1,075,000, with a premium threshold of $6,571,000. It generally uses the combined taxable unimproved land values, averaged over three years. The threshold is not applied separately to each property. Exemptions and ownership structures matter; special and discretionary trusts generally receive no threshold.
Revenue NSW requires sellers to provide a current land tax clearance certificate at least 14 days before settlement. A certificate showing a charge requires attention; obtaining the certificate does not clear the debt.
4 Confirm whether GST applies
Established residential premises are generally input taxed. New or substantially renovated residential premises may attract GST where the sale occurs in an enterprise and the seller is registered or required to register. A newly built private home is not automatically a taxable sale.
Review the contract’s GST treatment, any margin-scheme eligibility and the GST withholding requirements at settlement. GST liability and purchaser withholding are separate questions. Confirm supplier notices and payment arrangements before settlement.
5 Obtain the correct ATO clearance certificate
For contracts entered into from 1 January 2025, foreign resident capital gains withholding is 15%, with the former property-value threshold removed. Australian tax-resident sellers need an ATO clearance certificate to prevent withholding, including when selling a home. Each relevant seller should check their position early.
The purchaser must withhold and remit where required. Foreign residents may seek a variation. Withholding is a credit against the seller’s assessed tax, rather than automatically a final 15% tax. This certificate is different from the NSW land tax certificate.
A real case showing that even a failed sale can attract tax
In Commissioner of Taxation v Reliance Carpet Co Pty Limited (2008), a company contracted to sell Victorian business premises for $2,975,000. The purchaser paid a $297,500 deposit but failed to complete. The seller terminated the contract and retained the deposit.
The High Court upheld the GST assessment on the forfeited deposit. A completed property transfer was not necessary for a taxable supply: the contract created relevant rights and obligations. The lesson is to obtain advice before spending a forfeited deposit. This case concerned business premises; it does not mean every forfeited deposit on an ordinary residential sale attracts GST.
What the verified figures tell us
The 2026–27 Budget tax explainer reports that approximately 230,000 individuals acquired negatively geared properties in 2022–23, around 1% of taxfilers. These are historical national figures about acquisitions. They do not measure NSW sellers’ CGT liabilities, audit rates or penalties. Tax estimates should be based on the particular property and owner.
Prepare before putting the property on the market
Gather purchase records, improvement invoices, rental history and details of ownership changes. Ask your accountant for an estimated tax position and your solicitor to check the contract, certificates and settlement deductions. Keep enough sale proceeds available for tax rather than assuming the settlement balance is entirely yours to spend.
Contact CM Lawyers for assistance with your NSW sale and coordination with your tax adviser, particularly where an older investment property or the July 2027 transition is involved.
Key resources
- 2026 CGT reform legislation — Enacted 26 June 2026; see section 112-175 for pre-CGT assets and section 119-15 for minimum-tax exceptions.
- Treasury reform overview — CGT and negative gearing changes applying from 1 July 2027.
- Budget tax explainer — Pages 2–4 explain the transition; page 4 reports the 2022–23 acquisition figures.
- 14 October 2026 implementation update — Further legislation introduced, including new-build and other implementation details.
- ATO main residence guidance — Conditions for treating a former home as a main residence.
- NSW land tax thresholds and clearance certificates — Revenue NSW guidance updated in March and April 2026.
- ATO GST and residential property and GST at settlement — Sale treatment, supplier notices and withholding.
- ATO Australian residents and clearance certificates — Residency clearance and withholding requirements.
- Commissioner of Taxation v Reliance Carpet Co Pty Limited (2008) — Official High Court judgment concerning GST on a forfeited deposit.
