Where does the output of System.out.println go in gradle test?

The test output is part of the standard html report located in build/reports/tests/test/index.html. Simply click through the report to find the specific test you are interested in and there is a tab with Standard Output (and Standard Error if applicable).

To show the outputs during the gradle test run, you can modify your test task:

test {
    testLogging {
        showStandardStreams = true
    }
}

You can customize the output even more, see the docs.