Publish Date: October 25, 2026
Yes, you may have to pay Capital Gains Tax (CGT) when selling a property larger than 2 hectares, even if the entire property has always been your family home.
Under section 118-120 of the Income Tax Assessment Act 1997, the main residence exemption generally covers your dwelling and up to 2 hectares of land used primarily for private or domestic purposes. The capital gain attributable to the excess land may be taxable.
You can generally select which eligible 2 hectares qualify for the exemption, provided the selected area includes the land beneath your dwelling. However, CGT is not necessarily calculated based on the percentage of excess land. Where different parts of the property have different market values, an independent valuation may provide a more reasonable basis for allocating the capital proceeds.
For example, if you own a 3-hectare property, it does not automatically mean one-third of your capital gain is taxable. The dwelling and selected 2 hectares may represent a significantly greater proportion of the property’s total market value.
When calculating the taxable capital gain, you must also consider the relevant purchase costs, eligible capital improvements, selling expenses and other allowable cost-base amounts. Eligible individuals who have owned the property for at least 12 months may also qualify for the 50% CGT discount.
A professional valuation is not mandatory in every case, but it can be particularly important where the dwelling and surrounding land have substantially different values from the excess land. Historical evidence may also be needed to support the allocation of the original purchase price and other costs.
Read our complete guide to CGT on properties over 2 hectares for a practical example of how the main residence exemption and valuation rules work.
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