Key takeaways:
Settlement transfers ownership to the buyer and finalises the sale, with your conveyancer or solicitor coordinating the legal and financial requirements.
Selling a tenanted investment property can involve extra steps, including lease, bond, access and property management arrangements.
Your mortgage and settlement adjustments can affect the proceeds you receive, so understand the payout, rates, levies and other amounts before settlement.
Keep your property and tax records after the sale, as they may be needed to calculate capital gains tax (CGT) and support your tax position.
Settlement rules vary across Australia, so check your contract and state or territory requirements with your conveyancer or solicitor.
Selling an investment property involves more than accepting an offer. Settlement is the final stage of the sale, when ownership transfers to the buyer and the transaction is completed. If there is a mortgage over the property, your lender and conveyancer or solicitor will also coordinate its discharge. Investment properties can involve additional settlement considerations, including:
Tenants and leases, including the tenancy, bond and property management arrangements.
Rental and property records that may need to be retained or transferred.
Rates and other fees, such as council rates, water charges, land tax and strata or levies.
Tax considerations, including potential capital gains tax (CGT) and relevant record-keeping.
In this guide, we explain what happens at settlement when selling an investment property, what to organise beforehand, how tenants and mortgages are handled, what happens to the sale proceeds, and the tax and record-keeping considerations after settlement.
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What happens during investment property settlement?
Property settlement completes the sale and transfers legal ownership of your investment property to the buyer. The process and timing depend on your contract and the state or territory where the property is located, but generally involve five stages.
1. The contract is signed and exchanged.
Once you and the buyer enter into the contract in accordance with your state or territory's requirements, the sale moves toward settlement. The contract sets out key terms including the purchase price, settlement date, inclusions and any conditions that must be satisfied.
Your conveyancer or solicitor can explain your obligations under the contract.
2. Settlement preparations are completed.
Between exchange and settlement, the parties work through the legal and financial requirements needed to complete the transaction.
Your conveyancer or solicitor will generally confirm settlement figures and any relevant adjustments, while your lender will need to be involved if there is a mortgage to discharge.
3. Property and tenancy requirements are finalised.
Address any outstanding property requirements before settlement. These could include contractual conditions, agreed repairs or arrangements for vacant possession.
If the property is tenanted, the lease, bond and handover arrangements need to reflect whether the tenancy continues after the sale and the requirements in the relevant state or territory. We cover this in more detail below.
4. The buyer completes the final inspection.
Subject to the contract and applicable law, the buyer will generally have an opportunity to inspect the property shortly before settlement.
This allows them to check that the property is in the agreed condition and relevant contractual requirements have been met. The parties may need to address any issues before settlement.
5. Settlement is completed.
On settlement day, the legal and financial transaction is finalised. Funds are exchanged, applicable amounts are paid or adjusted, and any mortgage discharge is completed.
Once settlement is complete, ownership transfers to the buyer and the remaining sale proceeds are distributed as applicable.
Keep in mind: Settlement requirements vary across Australia. Your conveyancer or solicitor can explain the contractual and legal requirements that apply to your sale.
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What do you need to prepare before investment property settlement?
Once the contract is signed, focus on the documents, instructions and outstanding requirements needed to complete settlement. What you need to prepare will depend on the property, contract and applicable state or territory requirements.
1. Work with your conveyancer or solicitor.
Your conveyancer or solicitor will generally manage the legal side of settlement and liaise with the buyer's representative. Depending on the sale, this may include:
Reviewing the contract of sale and outstanding conditions
Completing or reviewing relevant title and property searches
Preparing or checking required seller disclosures
Confirming settlement figures and adjustments
Coordinating the transfer of ownership
Ask your conveyancer or solicitor what information they need from you and whether anything remains outstanding before settlement.
2. Arrange your mortgage discharge.
If the property is mortgaged, contact your lender about the mortgage discharge as early as practical.
Your final payout figure may differ from the balance shown in online banking because it can include interest and applicable fees or charges up to settlement. Your lender and conveyancer or solicitor will generally coordinate the discharge as part of the settlement process.
3. Organise your investment property records.
Keep the records relevant to the sale and your ongoing legal and tax obligations organised. Depending on your circumstances, these may include:
Property records: Relevant rates, strata or body corporate statements and other property documents.
Tenancy records: The lease, rent, bond and property management information if the property is tenanted.
Tax records: Documents relating to the property's purchase, ownership costs, capital improvements and capital works that may be relevant to your tax position.
You don't need to provide every document to the buyer. Your conveyancer or solicitor, property manager and tax adviser can help determine what should be transferred and what you should retain.
4. Check outstanding contract conditions.
Before settlement, confirm whether anything remains outstanding under the contract, such as agreed repairs, inclusions or other conditions specific to the sale.
If the property is tenanted, also check that the agreed tenancy arrangements are ready for settlement. The next section explains what to consider when selling an investment property with tenants.
Earlier in your selling journey? If you haven’t chosen a selling agent yet, Aussie Seller Assist can look for local agents and provide a shortlist of up to five based on sales results, listings, reviews and experience selling comparable properties. The service is free* to use, and you decide whether to appoint an agent.
You might also be interested in: Finalising your first-home purchase: Settlement and conveyancing explained
What happens if you sell an investment property with tenants?
Selling an investment property doesn't automatically end the tenancy.
Depending on the contract, tenancy agreement and applicable state or territory laws, the property may be sold with the tenancy continuing or with vacant possession. If vacant possession is required, the relevant termination requirements must be followed. This affects how you manage the contract, tenant communication, property access and settlement handover.
1. Confirm whether the property will be sold tenanted or vacant.
The contract should state whether the buyer is purchasing the property subject to an existing tenancy or with vacant possession. If the tenancy continues after settlement, the change of ownership and ongoing tenancy need to be handled in accordance with the relevant state or territory requirements, including any required notifications or bond arrangements.
If you need vacant possession, ending the tenancy must follow the relevant notice and tenancy requirements. Your conveyancer or solicitor can confirm that the contract reflects the agreed arrangement and explain the requirements that apply.
2. Manage tenant access and communication.
Access may be required for permitted purposes to a tenanted property for photography, inspections, valuations and the buyer's final inspection. Landlords and agents must follow applicable rules covering notice periods, access and tenant rights.
If you use a property manager, they can help communicate with the tenant, coordinate permitted access and manage the handover before settlement.
3. Confirm what happens to the lease, rent and bond.
Before settlement, confirm how you'll handle tenancy records and financial arrangements. Depending on your circumstances, this may include:
The tenancy agreement
Rent and relevant rental records
The rental bond
Property manager details and management arrangements
Keys and access arrangements
Other records required for the tenancy handover
The process for dealing with the bond varies by jurisdiction and whether the tenancy continues or ends. Check the requirements with your property manager and conveyancer or solicitor rather than assuming the bond will automatically transfer or be released.
What happens to your mortgage and settlement adjustments?
At settlement, sale funds are applied to amounts required under the settlement arrangements before any remaining proceeds are distributed in accordance with your instructions. This can include repaying your investment property loan and accounting for agreed adjustments with the buyer.
How is your mortgage repaid at settlement?
If there is a mortgage over the property, your lender will generally provide a final payout figure and coordinate with your conveyancer or solicitor to discharge the mortgage at settlement.
The payout figure may include the outstanding loan balance, interest up to the settlement date and applicable fees or charges. You generally pay the required amount from the settlement funds before the remaining proceeds are distributed to you.
If the sale proceeds are not enough to repay the amount required by your lender, speak with your lender and conveyancer or solicitor as early as possible about what needs to happen before settlement can proceed.
What are settlement adjustments?
Settlement adjustments divide certain property expenses between you and the buyer according to the contract and applicable requirements. Depending on the property and jurisdiction, these may include:
Council rates
Water rates and charges
Land tax
Strata or body corporate levies
Other outgoings covered by the contract
For example, if you have already paid an applicable property expense covering a period after settlement, an adjustment may account for the buyer's share. How individual expenses are calculated and allocated varies by contract and state or territory.
Your conveyancer or solicitor will generally prepare or review the settlement figures and explain the applicable adjustments.
ATO clearance certificates and withholding
If you’re selling Australian property, you may also need an ATO clearance certificate. For contracts signed on or after 1 January 2025, foreign resident capital gains withholding applies to Australian real property regardless of value.
Australian resident sellers generally need a clearance certificate to prevent 15% of the sale price being withheld at settlement. Different rules may apply if you’re a foreign resident or have an approved variation.
How are your remaining sale proceeds calculated?
The property's sale price is not necessarily the amount you will have available after settlement.
In simplified terms: sale funds → mortgage payout, if applicable → settlement payments and adjustments → remaining proceeds.
Other selling costs and potential tax liabilities, including CGT, may also affect your overall financial position but may not necessarily be deducted at settlement.
If you plan to use the proceeds towards another property, understanding how much may remain after the sale can help you assess your deposit, borrowing requirements and next lending steps.
What tax records do you need when selling an investment property?
Selling an investment property may result in a capital gain or capital loss. Keeping the right records can help your accountant or registered tax agent calculate your tax position.
How does capital gains tax apply when you sell?
For CGT purposes, the sale of an investment property is generally treated as occurring when you enter into the contract to sell, rather than on settlement day. This can affect the income year in which you report a capital gain or capital loss.
Broadly, capital gains tax (CGT) considers the property's capital proceeds against its cost base. The calculation can include certain costs associated with buying, owning, improving and selling the property, subject to Australian Taxation Office (ATO) rules.
Your final tax treatment depends on your circumstances, including how and when you acquired, owned and used the property.
Note: For CGT purposes, the sale happens when the contract is entered into, not at settlement.
Which investment property records should you keep?
Keep records that may be relevant to your property's cost base and tax history, including:
Purchase records: The purchase contract and relevant acquisition costs.
Improvement records: Invoices and receipts for renovations and capital improvements.
Capital works and depreciation records: Including relevant schedules, deductions claimed and supporting expenditure records.
Ownership records: Relevant rental income, deductions and other tax records.
Sale records: The sale contract and relevant selling costs.
The ATO generally requires records relating to buying, owning and selling property to be kept for at least five years after you dispose of the property. Different requirements may apply in some circumstances, so check the current ATO rules.
Not all expenses are treated the same way for tax purposes. Your accountant or registered tax agent can determine which records and costs are relevant to your CGT calculation.
For more information, see Aussie's guide on how tax works on an investment property.
Remember to check the tax rules that apply when you sell. Tax rules can change. Check current ATO requirements and seek qualified tax advice about how the sale applies to your circumstances.
What can go wrong at settlement when selling an investment property?
Settlement can be delayed if finance, documents, figures or property requirements are not ready. What happens next depends on the contract and applicable state or territory laws, so raise any issues promptly with your conveyancer or solicitor.
1. Buyer finance is not ready.
If the buyer's lender is not ready to provide funds on the agreed date, settlement may be delayed. The consequences can vary depending on the contract, the reason for the delay, and the jurisdiction.
Your conveyancer or solicitor can explain your options and any rights relating to extensions, default interest or other remedies.
What to do: Stay in contact with your conveyancer or solicitor about whether the matter is on track for settlement.
2. Settlement documents contain errors.
Incorrect or incomplete names, property details or other information may need to be corrected before settlement can proceed.
What to do: Provide requested information promptly and check documents carefully before signing.
3. Settlement figures are incorrect.
Errors or disputes involving rates, land tax, strata or body corporate levies and other adjustments may require the settlement figures to be revised.
What to do: Review the settlement statement with your conveyancer or solicitor and query any amounts you do not understand before settlement.
4. Tenancy or property issues arise.
A settlement issue may arise if the agreed tenancy arrangements have not been met or the buyer identifies a problem during the final inspection.
For example, the contract may require vacant possession when a tenant remains in the property, or the property may not be in the condition required under the contract.
What to do: Address tenancy and property requirements before settlement and seek advice from your conveyancer or solicitor if an issue arises.
Before settlement, check that your mortgage discharge, settlement documents, adjustments and any tenancy or property requirements are on track.
Why use a conveyancer or solicitor when selling an investment property?
A conveyancer or solicitor manages the legal requirements of your property sale and helps move the transaction from contract to settlement.
Depending on the property and state or territory, they may:
Prepare or review the contract and disclosures required for the sale.
Check title and property information relevant to the transaction.
Confirm settlement figures and review applicable adjustments.
Coordinate settlement with the buyer's representative and your lender.
Manage legal issues that arise before settlement, including contract or property-related matters.
Coordinate the transfer of ownership as part of the settlement process.
Their role is particularly important because property laws, disclosure requirements and settlement procedures vary across Australia.
A conveyancer or solicitor can advise on the legal aspects of the sale. For tax matters, including capital gains tax (CGT), speak with an accountant or registered tax agent.
How Aussie can help: If selling your investment property affects your existing lending or plans for another purchase, an Aussie Broker can help you review your borrowing position and explore home loan options based on your circumstances.
What happens after settlement?
Once settlement is complete, you transfer the investment property to the buyer. Your final steps are to close out your records, address any post-sale tax obligations, and review how the sale affects your finance. After settlement:
Keep your sale and tax records, including the contract, settlement statement and documents relevant to your tax position.
Check your lending arrangements, particularly if the property has a mortgage or the sale affects other loans.
Complete any remaining tenancy handover, where applicable.
Speak with your accountant or registered tax agent about the tax implications of the sale, including CGT where applicable.
If you plan to use the sale proceeds to buy another property, refinance or reduce debt, consider how the sale has changed your available funds and borrowing position before making your next move.
An Aussie Broker can help you review your lending position and explore home loan options based on your circumstances and lender criteria.
If your next move involves selling another property, Aussie Seller Assist can research local agents and provide a shortlist of up to five based on factors such as sales results, listings, reviews and experience selling comparable properties. The service is free* to use, and you decide whether to appoint an agent.
