CGT on Commercial Property Australia 2026-27: GST, Discounts & Worked Example

The short version: Sell a warehouse, office or shop in Australia and two separate taxes hit the same sale — capital gains tax (CGT) on your profit, and usually GST on the sale price. An individual who has held the property for more than 12 months gets the 50% CGT discount, and if it’s your business premises the small business concessions can stack on top and wipe the gain out entirely. On the GST side, you owe 1/11th of the sale price — unless the margin scheme or a GST-free going-concern sale applies. Get any of these wrong and the bill can be tens of thousands more than it needed to be.

How CGT works on a commercial property sale

The mechanics are the same as any CGT asset, but the details sting more because the numbers are bigger. The ATO’s formula is simple:

Capital gain = capital proceeds − cost base

Your capital proceeds are what you receive for the property — usually the sale price (or market value if you sell to a mate at a discount). Your cost base is what it cost you to buy, hold and sell it: the purchase price, stamp duty, legal and conveyancing fees, agent commission on the sale, and capital improvements like a fit-out or extension.

Here is the trap most sellers walk into: anything you claimed — or could have claimed — as a tax deduction is excluded from the cost base. If you have been claiming capital works deductions (Division 43) on the building for years, every dollar claimed comes straight off your cost base and straight onto your capital gain. We’ll put numbers on that below, because it surprises almost everyone.

One more baseline fact: if you acquired the property before CGT started on 20 September 1985, the gain is disregarded entirely. (Improvements made after that date are still caught, but the land and original building aren’t.)

The 50% discount — and who misses out

If you own the property as an individual (including as a partner in a partnership) and you have held it for more than 12 months, you can discount the capital gain by 50% before it lands in your taxable income. Trusts get the same treatment. Complying super funds get a 33⅓% discount.

Companies do not get the discount. If your warehouse sits in a company, the full nominal gain is assessable. This is the single most expensive ownership-structure mistake in commercial property: a $400,000 gain that costs an individual $200,000 of assessable income costs a company the full $400,000 (taxed at 25% or 30% company rates, but with no halving). Plenty of residential guides gloss over this because residential investors rarely use companies. Commercial owners do — all the time.

A worked example: the $1.3 million warehouse sale

Let’s make this concrete. Priya bought a small warehouse in 2018:

• Purchase price: $800,000
• Stamp duty, legal and buyer’s costs: $42,000
• Capital improvements (2021 fit-out): $58,000
• Sale costs (agent commission + legal): $30,000
• Capital works deductions claimed over the years: $45,000
• Sale price in 2026–27: $1,300,000

Step 1 — cost base: $800,000 + $42,000 + $58,000 + $30,000 = $930,000. Then the depreciation trap: the $45,000 of claimed capital works deductions is excluded, so the cost base falls to $885,000.

Step 2 — capital gain: $1,300,000 − $885,000 = $415,000.

Step 3 — 50% discount (held 8 years, owned personally): $415,000 → $207,500 added to her taxable income.

Step 4 — tax. Priya earns a $200,000 salary, so the gain sits in the 45% bracket. Tax on the gain: $207,500 × 45% = $93,375, plus 2% Medicare levy of $4,150 — a total of $97,525.

Now notice the depreciation line. If Priya had not claimed those capital works deductions, her cost base would have been $930,000, her gain $370,000, and her tax roughly $87,000. Claiming $45,000 of deductions over the years saved her maybe $16,000–$20,000 of income tax at the time, but added about $10,500 to this sale’s tax bill. It was still worth claiming — but you need to know the bill is coming, because many sellers budget the sale as if the deductions were free money.

GST on the sale: the second tax on the same deal

CGT is not the only tax in the room. The ATO’s position is blunt: selling commercial premises — shops, factories, offices — is generally a taxable supply, and you are liable for GST on the sale price. That means 1/11th of the sale price goes to the ATO, on top of whatever CGT you owe. You can claim GST credits on your selling costs (the GST in the agent’s commission, for example), but the headline liability is real.

There are two legitimate ways to pay less — or nothing:

1. The margin scheme

Under the margin scheme, your GST is 1/11th of the margin (roughly, sale price minus what you paid), not 1/11th of the full price. On Priya’s warehouse, sold for $1.43 million GST-inclusive after buying for $800,000:

• Standard GST: $1,430,000 ÷ 11 = $130,000
• Margin scheme: ($1,430,000 − $800,000) ÷ 11 = $57,273

That is a $72,727 difference for a tick-box in the contract. Three catches: both parties must agree in writing (usually a contract clause) before settlement; you can’t use it if you originally bought the property as a fully taxable supply without the margin scheme; and the buyer cannot claim a GST credit on a margin-scheme purchase — which makes your property more expensive to a GST-registered buyer and can affect your negotiating position.

2. Selling as a GST-free going concern

If the property is leased and you sell it with the tenancies intact, the sale can be GST-free as a going concern — $0 GST. But every one of these conditions must hold:

• There is payment for the supply;
• The buyer is registered (or required to be registered) for GST;
• Buyer and seller agree in writing that it is a going concern;
• The seller supplies everything necessary for the continued operation of the enterprise;
• The seller carries on the enterprise until the day of supply.

A fully tenanted building with all leases assigned qualifies. A partially tenanted building can qualify if the vacant part is being actively marketed or is under repair, and all existing leases transfer. What does not qualify: a building you occupied for your own business where the business itself isn’t being sold — that’s just a vacant building, and the sale is taxable. And watch the buyer-registration trap: if your buyer (say, an SMSF) isn’t GST-registered at settlement, the going-concern treatment collapses and the GST liability can land back on you.

Small business concessions: the four that stack

If the property is your business premises and you pass the basic tests — aggregated turnover under $2 million or net assets under $6 million — four concessions can apply to the same gain, in a specific order:

1. 15-year exemption: owned continuously for 15+ years, and you’re 55+ and retiring (or permanently incapacitated) — the entire gain is disregarded.
2. 50% active asset reduction: the gain is halved again. This stacks on top of the general 50% CGT discount, so an individual can shelter three-quarters of a gain before touching the other concessions.
3. Retirement exemption: up to $500,000 of gains disregarded over your lifetime. If you’re under 55, the exempt amount must go into super.
4. Rollover: defer the gain by buying a replacement active asset (or improving one) within one year before to two years after the sale.

Watch it work on a $400,000 gain on a business warehouse held 5 years: the 50% discount takes it to $200,000; the 50% active asset reduction takes it to $100,000; the retirement exemption absorbs the remaining $100,000 (using $100,000 of the $500,000 lifetime cap) — assessable gain: nil. A $400,000 profit, legally tax-free, because the concessions were applied in the right order with the right paperwork.

Two 2026–27 notes. First, the 2026 Federal Budget announced the turnover ceiling for these concessions would lift from $2 million to $10 million — that was an announcement in a Bill, so confirm the law is in force before relying on it. Second, from 1 July 2027 the general 50% discount is replaced by indexation plus a 30% minimum tax on gains; the small business concessions survive the reform, but the stacking maths changes. Our CGT reform guide walks through the new rules.

Same gain, three owners: why structure matters

Take that $415,000 warehouse gain and run it through three ownership structures:

• Individual (held 8 years): 50% discount → $207,500 assessable. At a 45% marginal rate: ~$97,500 including Medicare levy.
• Company: no discount → $415,000 assessable at 25–30%. At 25%: $103,750 — and then Division 7A or dividend tax to get the money out.
• Self-managed super fund: 33⅓% discount → ~$276,700 assessable at 15% = ~$41,500; in pension phase the gain can be tax-free.

The company route also loses the small business concessions’ best features for individuals. If your commercial property is already in a company, talk to your accountant before listing it — restructuring after contracts are exchanged is usually too late.

Selling before or after 30 June 2027?

With the 1 July 2027 CGT reform replacing the 50% discount with cost-base indexation (plus a 30% minimum tax rate on gains), timing a commercial sale is now a genuine strategic decision:

• Long-held properties with big nominal gains (bought 10–20 years ago) will often do better selling before 30 June 2027, while the flat 50% discount still applies.
• Properties where most of the “gain” is just inflation — modest nominal growth over a long hold — can do better under indexation, because indexing the cost base wipes out the inflationary part of the gain.
• The 30% minimum tax on post-reform gains means discount-rate taxpayers (15–30% brackets) may pay a higher effective rate after the change than before.

This is a modelling exercise, not a gut call — run both scenarios with your accountant using your actual cost base, because the answer flips depending on your holding period and your marginal rate. And remember the CGT event happens on the contract date, not settlement: a contract signed on 28 June 2027 is under the old rules even if it settles in August.

Contract traps that cost real money

• “Plus GST” vs GST-inclusive price. A $1.3 million contract “plus GST” means the buyer pays $1.43 million and you remit $130,000. A $1.3 million GST-inclusive contract means you remit $118,182 and keep the rest. The two words change your net proceeds by over $11,000.
• Margin scheme tick-box. If you want the margin scheme, the contract must say so in writing. You cannot decide after settlement.
• Going-concern agreement in writing. A handshake with the buyer that “we’ll treat it as a going concern” is worthless to the ATO. The written agreement and the buyer’s GST registration must both exist at settlement.
• Foreign buyers and FRCGW. The 15% foreign resident capital gains withholding applies to commercial property too. If you’re an Australian resident vendor, get your clearance certificate early — without it, the buyer must withhold 15% of the price. See our non-resident CGT guide.
• GST registration on one-off deals. Even a single property transaction can make you “conducting an enterprise” for GST purposes. If your turnover crosses the $75,000 registration threshold, you may need to be registered — check before you sign, not after.

Common mistakes

• Forgetting the depreciation clawback. Claimed capital works deductions reduce your cost base. Budget for the bigger gain.
• Assuming the company gets the discount. It doesn’t. Structure the sale entity before you list.
• Missing the margin-scheme agreement. One missing clause, $70,000+ of extra GST.
• Treating an owner-occupied sale as a going concern. Without the business being sold, it’s just a taxable sale.
• Ignoring the small business concessions entirely. Most commercial sellers who qualify never claim them — the active asset reduction alone halves the remaining gain.
• Getting the contract date wrong for the 2027 reform. Sign before 1 July 2027 and the old discount applies; sign after and you’re in the new world.

Estimate your numbers first with our CGT calculator, then model the GST position with the GST calculator — and if the property was your business premises, read our small business CGT concessions guide before you talk to your accountant.

Frequently asked questions

Do I pay both CGT and GST when I sell a commercial property?

Usually, yes — they are separate taxes on separate bases. CGT taxes your profit (proceeds minus cost base); GST is 1/11th of the sale price (or of the margin, under the margin scheme). A GST-free going-concern sale removes the GST but never the CGT.

Can I claim the 50% CGT discount on a warehouse I have owned for 10 years?

If you own it as an individual or through a trust, yes — the gain is halved before it enters your taxable income. Companies get no discount. Note that from 1 July 2027 the discount is replaced by indexation for new gains.

Does the buyer pay the GST or do I?

You (the vendor) are liable for GST on the sale, but the contract price is almost always quoted “plus GST” or GST-inclusive, so economically the buyer funds it. Under the margin scheme or a going-concern sale, the economics change — get the contract wording right.

Can the buyer claim a GST credit if I use the margin scheme?

No. That is the trade-off: you pay GST on the margin only, but the buyer gets no input tax credit. GST-registered buyers will factor that into their offer price.

I claimed depreciation on the building every year. Does that affect my CGT?

Yes. Capital works deductions you claimed (or could have claimed) are excluded from the property’s cost base, which increases your capital gain. Plant and equipment depreciation works differently — get advice on the split.

What if I sell at a loss?

A capital loss on commercial property can be carried forward indefinitely and offset against future capital gains — but never against your salary or business income. Keep the records; losses don’t expire.

The bottom line

Commercial property sales are where CGT gets expensive — and where the planning pays best. The 50% discount halves the gain, the small business concessions can eliminate what’s left, and the right GST treatment (margin scheme or going concern) can save more than the CGT planning itself. The mistakes are all avoidable: wrong entity, missing contract clauses, forgotten depreciation adjustments, and bad timing around the 1 July 2027 reform. Model the numbers before you sign anything — a one-hour session with your accountant on a $1.3 million sale is the highest-paid hour of your year.

Related reading: CGT on property (residential) · the 50% discount rule · CGT on subdivided land.