Real estate agent fees are not typically deductible as a yearly income tax expense; instead, they are added to the cost base of the property. This increases the total cost of the asset, which reduces the overall capital gain and lowers the Capital Gains Tax (CGT) payable upon sale.
Many vendors are currently reviewing these costs as Victoria faces its heaviest property tax burden in 2026. This environment has led to compressed net rental yields for inner-city investors (Forge Property, February 2026), making the efficient management of sale costs critical.
Strategies to minimise Capital Gains Tax
Reducing the taxable gain often involves timing the sale to coincide with low-income years, such as retirement or maternity leave. Vendors can also use existing capital losses from other assets to offset the gain or split the gain between joint owners to apply their respective marginal rates.
The impact of cumulative tax increases
Investment divestment is increasing due to the combined effect of land tax rises, VRLT expansion, and the congestion levy. For those with inner-Melbourne assets, the 2026 congestion levy rates are $3,030 for Category 1 and $2,150 for Category 2, affecting owners of separately titled car parks.
Land tax and settlement obligations
The 2026 land tax adjustment prohibition threshold is $10.7 million. For sale contracts below this amount, sellers cannot require buyers to contribute to land tax at settlement and must absorb these costs up to the settlement date.
The timing risk
A common point of confusion is the distinction between the contract date and the settlement date. While deferring settlement to the next financial year can be a strategy, the CGT event is triggered on the date the contract is signed, not when settlement occurs.
Frequently asked questions
When is the CGT event triggered during a sale?
The CGT event is the date the sale contract is signed, not the date of settlement. If you are timing your sale to fall into a specific financial year for tax purposes, the contract date is the determining factor. Records must be kept for five years after lodging the relevant tax return.
How does the congestion levy affect my inner-Melbourne property?
The levy applies to off-street car parking in zones including Boroondara, Stonnington, and Yarra. 2026 rates are $3,030 for Category 1 and $2,150 for Category 2. From 1 January 2026, Category 2 expanded to include Richmond, South Yarra, Windsor, and Cremorne.
What happens with land tax at settlement in 2026?
If the sale contract is below the $10.7 million prohibition threshold, the seller cannot request a land tax contribution from the buyer at settlement. The seller is responsible for all land tax accrued up until the settlement date is reached.
Why are so many investors selling in Melbourne right now?
Investors are reacting to unsustainable negative cash flow caused by RBA rate rises and a heavy tax burden, including the Short Stay Levy and VRLT expansion. Additionally, net rental yields for inner-city investors have been materially compressed (Forge Property, February 2026).
Questions to ask your agent
- How is the increase in investor divestment affecting buyer competition in my specific submarket?
- Given the $10.7 million land tax threshold, how are similar properties in my area handling settlement adjustments?
- What evidence do we have of owner-occupiers entering this corridor to replace departing investors?
This article contains general market information based on data current as at April 2026. It does not constitute financial, legal, or real estate advice specific to your property or circumstances. For an appraisal and tailored advice, speak with a Fletchers agent in your area.