CGT Calculator: Cost Base vs Discount Rate — Which Strategy Saves You More?

If you are trying to decide when to sell your investment property, how much to spend on renovations before selling, or whether you are better or worse off under the new 2026 CGT discount rules — you need to understand three things: what Division 43 depreciation is, how the CGT discount rate works, and how cost base additions affect your final tax bill. The interactive calculator below lets you enter your own numbers and compare any two scenarios side by side. But first, the explanation that makes the numbers make sense.

Division 43 is the part of the tax law that allows property investors to claim an annual deduction for the slow wearing out of the building itself — the bricks, concrete, roof, walls, and floors. Not the contents of the building (those are covered by Division 40), but the structure.

The ATO says: residential buildings built after 16 September 1987 can be depreciated at 2.5% of the original construction cost per year, over 40 years. So if a building cost $300,000 to construct originally, the investor can claim $300,000 x 2.5% = $7,500 per year as a non-cash tax deduction — every year they own it, for up to 40 years from the original build date.

Why "non-cash"? Because you do not spend $7,500. You get a $7,500 deduction simply because the building theoretically declines in value each year. At a 47% marginal rate, that $7,500 deduction saves you $3,525 in tax annually without writing a single cheque. Commission a quantity surveyor (cost: $600-$800, itself deductible) and they calculate the exact construction cost and Division 43 entitlement for you.

The catch — and this is the part most investors miss: Every dollar you claim in Division 43 during your ownership reduces your cost base at sale by the same amount. The ATO does not let you deduct the same cost twice — once as depreciation during ownership, and again as part of the cost base at exit.

Worked example:
You buy a property for $800,000 in 2015. The quantity surveyor determines the Division 43 entitlement is $7,000/year.
You own it for 11 years, claiming $7,000 each year = $77,000 total Division 43 claimed.
When you sell in 2026, your cost base is reduced by $77,000.
If your purchase price was $800,000, the effective cost base for CGT becomes $800,000 minus $77,000 = $723,000.

That means your gross capital gain is $77,000 higher than it would have been without the depreciation deductions. But here is why it is still worthwhile: you received the tax benefit at your full marginal rate (47%) in each year you claimed it. The cost base reduction only increases the gain by $77,000 — and after the 50% CGT discount, only $38,500 of that is assessable, taxed at 47% = $18,095 additional CGT. You saved $77,000 x 47% = $36,190 in tax over the years and only "repay" $18,095 at exit. Net benefit: $18,095. Division 43 is almost always worth claiming.

Why this matters for the calculator below: The "Division 43 depreciation claimed" slider shows your cumulative Division 43 deductions over your ownership period. Moving it higher increases the gross capital gain — which increases CGT in both scenarios. This is exactly how the ATO treats it at sale.

After you calculate the gross capital gain (sale proceeds minus cost base), the CGT discount reduces the portion of that gain that is assessable — the portion you actually pay tax on. You only qualify for the discount if you held the property for more than 12 months.

The old rule (still applies to grandfathered properties): 50% discount. If your gross gain is $500,000, only $250,000 is assessable. You pay tax only on half the gain.

The 2026 budget change (for new purchases after the cutoff): 33% discount. If your gross gain is $500,000, 67% is assessable = $335,000. You pay tax on two-thirds of the gain instead of half.

For grandfathered properties (purchased before the cutoff), nothing has changed — the 50% discount applies permanently for as long as you hold them. For new post-cutoff purchases, the 33% discount is locked in. The calculator lets you see the exact dollar difference this makes on your specific numbers.

The cost base is everything you legitimately paid to acquire and hold the property in a capital sense. It directly reduces your gross capital gain before any discount is applied. Every extra dollar in the cost base saves you money.

What goes in: Purchase price, stamp duty, legal fees on purchase, building and pest inspection fees, capital improvements during ownership (renovations that enhanced the property — not repairs), legal fees on sale, agent commission, and marketing costs.

What reduces it: Division 43 deductions claimed during ownership (as explained above).

What does NOT go in: Repairs and maintenance costs — these were immediately deductible as rental expenses during ownership, so they cannot be added to the cost base as well. Getting this wrong is one of the most common errors the ATO finds in CGT calculations.

The "cost base impact" mode in the calculator shows you exactly what each additional $10,000 of documented renovation receipts is worth at sale. Spoiler: under the 33% discount regime, documented receipts are worth more per dollar than under the 50% regime — because a larger proportion of the gain is assessable, every dollar that reduces it saves more tax.

Enter your property's numbers below. The calculator has three comparison modes — switch between them using the tabs:

50% vs 33% discount: Shows the exact dollar cost of the 2026 rule change on your property. Relevant if you are comparing selling a grandfathered property vs a post-cutoff purchase, or understanding what the change means for new properties you are considering buying.

Sale timing: Shows the saving from selling in a retirement year (no salary) vs selling while still working at your current income. Often the single largest available saving — no action required beyond choosing the exchange date.

Cost base impact: Shows the direct tax value of your additional documented capital expenses. If you have renovation receipts you have not yet formally recorded, this shows exactly what they are worth.

The three cards at the top of the results show: Scenario A CGT, Scenario B CGT, and the SMSF pension phase result ($0 — always). The highlighted bar underneath shows which scenario produces a lower tax bill. The difference box shows the saving in dollar terms.

Below the cards, the full calculation breakdown shows every step: sale price, selling costs, net proceeds, cost base, gross capital gain, assessable gain after discount, and the final CGT for both scenarios. This is the same calculation your accountant uses — running through it with your actual numbers before you list gives you a clear picture of what you will owe and whether any planning actions are still available.

One important note: the calculator uses a simplified marginal rate model for the timing comparison. Your actual CGT in the retirement year scenario will depend on your other income sources (super drawdowns, interest, rental income from other properties) — your accountant can model this precisely. The calculator is designed to show the direction and rough magnitude of the saving, not to replace a tax calculation. For the complete FY27 strategy guide: CGT Minimisation Guide FY27 Edition.

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If the calculator has shown you a meaningful difference and you want a precise CGT calculation for your specific property — with the actual cost base, Division 43 position, and income year modelled correctly — a 20-minute call with our team will give you the exact numbers before you list.
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Disclaimer: This calculator is for illustrative purposes only and does not constitute tax advice. CGT calculations depend on individual circumstances. The Division 43 cost base reduction, capital improvements treatment, and income year calculations all require professional verification. Australian Retirement Office does not hold an AFSL. Always obtain advice from a qualified tax adviser before selling investment property.

Related: CGT Minimisation Guide FY27 | What Tax Do I Pay When I Sell? | CGT Complete Guide | Investment Property Tax: Complete Guide | How to Reduce CGT: 7 Strategies