Capital Gains Tax is not a separate tax — it's the amount of capital gain included in your assessable income and taxed at your marginal rate. Understanding CGT is essential for anyone selling property, shares, or other assets.
When Does CGT Apply?
A CGT event happens when you dispose of an asset. The most common events are:
- Selling a house or investment property
- Selling shares or managed fund units
- Selling a business or business assets
- Gifting an asset (market value rules apply)
- Losing or destroying an asset (insurance proceeds)
Calculating a Capital Gain
Capital Gain = (Sale Price - Selling Costs) - (Cost Base)
Cost base includes:
- Purchase price
- Stamp duty and legal fees on purchase
- Renovations and improvements (not repairs)
- Agent commissions and legal fees on sale
- Advertising costs
The 50% CGT Discount
If you've held the asset for more than 12 months, you can reduce the capital gain by 50% (for individuals). This is the single biggest tax concession in Australia. Companies are not eligible — they pay full CGT on the gain.
Example: You buy shares for $10,000 and sell 14 months later for $18,000. Your gain is $8,000. With the 50% discount, you only include $4,000 in your assessable income.
Main Residence Exemption
Your family home is generally exempt from CGT. The key rules:
- The property must be your primary place of residence
- You must live in it (not just intend to)
- Land is limited to 2 hectares
- The "6-year rule" lets you treat a former home as your main residence for up to 6 years if you rent it out
- The "absence rule" — if you move out and don't rent it, you can treat it as your main residence indefinitely
CGT for Investment Properties
If you've rented out a property that was once your home, you may be entitled to a partial exemption. The gain is apportioned based on the period it was used as a rental vs. your main residence.
Small Business CGT Concessions
If you operate a business through a company, trust, or as a sole trader, four CGT concessions may apply to reduce or eliminate tax on business asset sales:
- 15-year exemption (retirement)
- 50% active asset reduction
- Retirement exemption (up to $500,000)
- Rollover
Record Keeping for CGT
The ATO requires you to keep records of every CGT event for 5 years after the relevant tax return is lodged. For property, keep records for 5 years after disposal. For shares, use a share registry or your broker's transaction history.
How the 50% Discount Works, Step by Step
When you sell a capital asset — shares, an investment property, or a business asset — the gain is the difference between what you paid (the cost base, including buying costs and some holding costs) and what you received (net of selling costs). For assets held for more than 12 months, individuals and trusts can halve the gain before it is added to assessable income; super funds get a one-third discount instead. Companies do not get any discount — one reason high-income earners often hold investments personally rather than through a company.
Here is a worked example for 2025-26: you buy shares for $20,000, pay $600 in brokerage, and sell them two years later for $35,000 (after $600 selling costs). Your cost base is $20,600 and your capital proceeds are $34,400, so the gain is $13,800. After the 50% discount, $6,900 is added to your assessable income — at the 37% marginal rate that costs about $2,553 in tax, versus $5,106 without the discount.
CGT on Shares, Crypto and Property — What to Track
- Shares and ETFs: Every sale is a CGT event, even a small one. The ATO receives data from share registries, so unreported sales are easy to detect.
- Crypto: Exchanging one coin for another is a disposal — the ATO has been matching data from Australian crypto exchanges since 2014-15, so trades are visible.
- Property: The main residence exemption generally makes your family home CGT-free, but the land under it is not fully exempt if it exceeds two hectares, and periods when the home was rented out or not your main residence can create a partial taxable gain.
- Capital losses: Losses can be carried forward indefinitely and offset against future capital gains — but you cannot offset them against salary or business income.
Action Plan: Staying CGT-Safe
- Keep a record of every acquisition and disposal — contract notes, brokerage statements, and bank transfers.
- Record your cost base adjustments: capital improvements to property, and any non-assessable payments like returns of capital on shares.
- If you have carried-forward capital losses, declare them each year even if you have no gains — the ATO does not track them for you.
- Declare the CGT event in the income year it happened; the ATO's 2025-26 data-matching program covers property, shares, and crypto.
- Keep CGT records for five years after the return is lodged, and longer for property with a cost base you may need to reconstruct.