Yes, you can use sale proceeds to pay off your home loan, but the net amount available will be reduced by Capital Gains Tax (CGT). Because CGT is added to your assessable income and taxed at your marginal rate, the final sum depends on your income level and the timing of the contract signing.
Investors are increasingly crystallising gains from properties purchased between 2017 and 2020 to reduce debt as Victoria’s tax environment becomes more onerous. The available equity for loan repayment is dictated by the tax liability triggered at the point of sale.
The impact of Capital Gains Tax (CGT)
CGT is not a separate tax but is part of the income tax system, meaning any gain is added to your assessable income for the financial year. The CGT event crystallises on the date the contract of sale is signed, not the settlement date. This distinction is critical for owners attempting to time their sale around 30 June to manage their tax bracket.
Strategies to maximise net proceeds
Selling during a low-income year, such as during retirement or maternity leave, can minimise the effective tax rate on the gain. Joint owners can split the gain to report 50% each at their respective marginal rates, or use existing capital losses from other assets to offset the property gain. A 50% discount applies to the taxable portion if the asset was held for more than 12 months.
The 2026 market environment
A Melbourne price recovery is underway, though the buyer pool has partially reduced following 2026 rate hikes. Listing competition is rising as vendor confidence returns, making the current window preferable to waiting for further competition. Many are selling to avoid the cumulative effect of land tax rises, the VRLT expansion, and the Short Stay Levy.
The yield compression risk
Net rental yields for Melbourne inner-city investors have been materially compressed (Forge Property, February 2026). When combined with Victorian tenancy law reforms that limit rent increases and reduce grounds for ending tenancies, the cost of holding often exceeds the potential for additional capital growth.
Frequently asked questions
When is the CGT event triggered for my property sale?
The CGT event occurs on the date the contract of sale is signed, not the date of settlement. If you are timing your sale to fall into a specific financial year for tax purposes, you must ensure the contract is executed before 30 June.
Can I avoid CGT if I lived in the property?
A partial main residence exemption applies if the property was your principal place of residence for part of the ownership period. Additionally, the 6-year rule allows you to treat a former home as your main residence for up to six years while renting it out.
Why are more investors selling their properties in 2026?
Investors are responding to Victoria’s heavy property tax burden, including land tax increases and the congestion levy expansion. Many negatively geared investors found cash flow unsustainable following the RBA rate rises of 2022–2023 and are now choosing to divest.
How can I reduce the tax on my investment sale?
You can minimise the tax hit by selling in a year where your other income is lower or by using capital losses from other investments to offset the gain. If the property is owned jointly, the gain is split between owners’ marginal rates.
Questions to ask your agent
- How is the increase in listing competition in the eastern suburbs affecting the time it takes to secure a contract?
- Are owner-occupiers currently outbidding investors for properties in the Mornington Peninsula corridor?
- Based on recent open for inspections, how is the reduced buyer pool in 2026 affecting the gap between asking and achieved prices?
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.