How Capital Gains Tax Works in Australia
Capital gains tax (CGT) is the tax payable when you make a capital gain from the disposal of a CGT asset. In Australia, CGT is not a separate tax — it is included in your assessable income for the year and taxed at your marginal income tax rate. Australia introduced CGT on 20 September 1985; assets acquired before this date (pre-CGT assets) are generally exempt.
A capital gain arises when the sale proceeds exceed the asset's cost base. A capital loss occurs when the sale proceeds are less than the cost base. Capital losses can only offset capital gains, not other income. Unused losses carry forward indefinitely.
The 50% CGT Discount
For CGT assets held for more than 12 months, Australian resident individuals and trusts are entitled to a 50% CGT discount. This means only half of the net capital gain is included in your assessable income. For example, if you made a $40,000 capital gain on shares held for 18 months, only $20,000 is added to your taxable income.
The discount significantly reduces the effective CGT rate. At a 32.5% marginal rate, the effective CGT rate on a discounted gain is just 16.25%. At 45%, it's 22.5% — still well below the marginal rate on regular income.
Who gets the discount: Australian resident individuals and trusts. Companies do not receive the 50% discount (but can apply indexation for pre-September 1999 assets). Non-residents are generally not entitled to the 50% discount.
What Is the Cost Base?
The cost base of a CGT asset includes:
- Money paid to acquire the asset — the purchase price
- Incidental costs of acquisition — brokerage, stamp duty, legal fees, title transfer costs
- Costs related to owning the asset — only certain costs (repairs not deductible elsewhere, rates on investment property)
- Capital improvements — building extensions, major renovations
- Incidental costs of disposal — selling brokerage, agent fees, legal fees on sale
For investment properties, the cost base can be complex — ongoing deductible expenses (interest, depreciation) generally cannot be added to the cost base. See ATO — Cost base and reduced cost base for detailed rules.
CGT on Shares
Shares are the most common CGT asset for Australian investors. Key points:
- Each parcel of shares has its own cost base (purchase price + brokerage)
- When selling multiple parcels, you can choose which parcel you are selling to optimise CGT outcomes (e.g., sell parcels held over 12 months to access the 50% discount)
- Share splits and consolidations typically do not trigger a CGT event
- Dividend reinvestment plans (DRPs) create new CGT assets each time, with the reinvested amount as the cost base
- Franked dividends do not affect CGT — the franking credit is a separate income item (see our Franking Credits Calculator)
CGT on Property
Your main residence (the home you live in) is generally exempt from CGT. The main residence exemption applies if you have lived in the property the entire time you owned it and did not use it to produce income. Partial exemptions apply if you rented it out for part of the time or if you used part of the home for business.
Investment properties are fully subject to CGT. The 50% discount applies if held over 12 months. Many investors use negative gearing strategies that interact with CGT planning — the rental losses you claimed over the years do not increase the cost base.
CGT on Cryptocurrency
The ATO treats cryptocurrency as property (a CGT asset), not currency. Every disposal is a CGT event — this includes selling crypto for AUD, trading one cryptocurrency for another (e.g., BTC to ETH), and using crypto to pay for goods or services. The 50% discount applies if you held the crypto for over 12 months before disposal.
Mining, staking, and DeFi rewards are generally treated as ordinary income (not CGT) when received. If you later sell those coins, any further gain is subject to CGT from the date they were received. See the ATO cryptocurrency guide for the latest rules.