Capital gains tax — or CGT as most people call it — is one of those taxes that does not affect you until the day it suddenly does. Maybe you sold some shares that went up in value. Maybe you sold an investment property. Maybe you made a profit on cryptocurrency. Whatever the situation, if you made money from selling an asset, the ATO wants a slice of the gain.
The good news is that CGT in Australia is not a separate tax. It is added to your regular income and taxed at your marginal rate. And if you held the asset for more than 12 months, you get a generous 50% discount. But the details matter, and getting it wrong can mean paying too much — or too little (which leads to penalties). So let us walk through how it all works.
What Is a Capital Gain?
A capital gain is the profit you make when you sell (or dispose of) an asset for more than you paid for it. The formula is simple:
Capital gain = Sale price - Cost base
The cost base is not just the purchase price. It includes things like stamp duty on the purchase, legal fees, agent commissions, and the cost of any improvements you made (if it is a property). Basically, any costs directly related to buying, holding, or selling the asset can be included in the cost base, which reduces your gain and therefore your tax.
If you sold the asset for less than you paid for it, you have a capital loss. Capital losses can be used to offset capital gains — you cannot claim them against your regular income, but you can carry them forward indefinitely to offset future gains. Use our capital gains tax calculator to work out your gain and estimate the tax.
The 50% CGT Discount
This is the big one that makes Australian CGT relatively generous compared to many other countries. If you are an Australian resident individual and you held the asset for at least 12 months before selling it, you only include 50% of the capital gain in your taxable income. The other 50% is completely tax-free.
For example, if you bought shares for $10,000 and sold them 18 months later for $25,000, your capital gain is $15,000. But because you held them for more than 12 months, you only add $7,500 to your taxable income. If your marginal tax rate is 30%, the tax on the gain would be $2,250 instead of $4,500. That discount makes a massive difference.
The 50% discount applies to individuals and trusts. It does not apply to companies — they pay tax on the full gain at the company tax rate (25% for base rate entities). Self-managed super funds get a one-third discount (meaning they include two-thirds of the gain).
CGT on Property
Your main residence — the home you live in — is generally exempt from CGT under the main residence exemption. Sell your family home for a million-dollar profit and you pay zero CGT. This is one of the most valuable tax concessions in Australia.
But investment properties are a different story. When you sell an investment property, you pay CGT on the gain, just like any other asset. The cost base includes the original purchase price, stamp duty, legal fees, real estate agent commissions on both the purchase and sale, and the cost of any capital improvements (like a new kitchen or bathroom).
If you have been claiming depreciation on the property or its fixtures, be aware that the ATO will adjust your cost base accordingly. Items that have been fully depreciated have a cost base of zero for CGT purposes. Our landlord rental tax calculator can help you understand the tax implications of your investment property, and our stamp duty calculator shows how much you paid (or will pay) on the purchase.
CGT on Shares and Managed Funds
If you invest in shares or managed funds, you will trigger a CGT event every time you sell units for a profit. This includes selling shares on the ASX, redeeming managed fund units, or participating in share buybacks or corporate restructures.
Managed funds can also distribute capital gains to you even if you did not sell anything. This happens when the fund manager sells assets within the fund and passes the gains on to unit holders. You will see this on your annual tax statement from the fund.
Keeping good records is essential. You need to know the purchase date and price for every parcel of shares you sell. If you bought the same shares on multiple occasions, the ATO allows you to choose which parcels you are selling (known as the "specific identification method") or you can use the "first in, first out" approach. The choice can significantly affect your tax outcome.
CGT on Cryptocurrency
The ATO treats cryptocurrency as a CGT asset, not as currency. This means every time you sell crypto, trade one crypto for another, use crypto to buy goods or services, or give crypto as a gift, you may trigger a CGT event.
The 50% discount applies to crypto held for more than 12 months, just like shares. But the record-keeping requirements can be intense, especially if you are an active trader with hundreds of transactions across multiple exchanges. Our crypto tax calculator can help you estimate the CGT on your crypto transactions.
How CGT Interacts With Your Other Income
Remember, capital gains are added to your regular taxable income. This means a large capital gain in a single year could push you into a higher tax bracket. If you normally earn $80,000 and you realise a $50,000 capital gain (after the 50% discount, so $25,000), your taxable income jumps to $105,000. The gain is effectively taxed at your highest marginal rate.
This is why timing matters. If you have the flexibility to choose when you sell an asset, it can make sense to do it in a lower-income year — for example, if you are between jobs, on parental leave, or have retired. Our salary calculator can help you understand your tax brackets so you can plan the timing of a sale.
Capital Losses: Using Them Wisely
If you have assets that are sitting at a loss, you can sell them to crystallise the capital loss and use it to offset gains. This is sometimes called "tax-loss harvesting." There are some rules to be aware of — you cannot sell and immediately repurchase the same asset to manufacture a loss (the ATO may treat this as a wash sale and deny the loss). But legitimate selling of underperforming investments to offset gains is a perfectly valid strategy.
Capital losses must be applied against capital gains in a specific order: first against gains that do not qualify for the 50% discount, then against discounted gains (before the discount is applied). This maximises the benefit of the losses.
Practical Tips
- Keep records from day one. Every purchase receipt, every brokerage statement, every contract of sale. The ATO requires you to keep CGT records for at least five years after the relevant CGT event.
- Factor in all cost base elements. Do not forget stamp duty, legal fees, agent commissions, and improvement costs — they all reduce your gain.
- Hold for 12 months if you can. The 50% discount is one of the most valuable concessions in the tax system. If you are close to the 12-month mark, it is often worth waiting.
- Use losses strategically. If you have both winners and losers in your portfolio, consider selling them in the same financial year to offset the gains.
- Get advice on large transactions. If you are selling a property or a large share portfolio, the tax implications can be complex. It may be worth getting professional advice.
The Bottom Line
CGT is a fact of life for anyone who invests in Australia. But with the 50% discount for assets held over 12 months, the ability to offset gains with losses, and a range of exemptions (like your main residence), it is a manageable tax if you understand the rules. Use our capital gains tax calculator to estimate your liability, keep good records, and plan your sales strategically to minimise the tax hit.