Capital Gains Tax in Australia

What is a capital gain?

A capital gain arises when you sell an asset for more than you paid for it. The gain is the difference between your sale proceeds and the asset's cost base. Broadly, what you paid including eligible acquisition costs such as brokerage, legal fees, and stamp duty.

CGT applies to assets acquired after 19 September 1985. Assets acquired before that date are "pre-CGT assets" and any gain on their disposal is generally not assessable.

CGT is not a separate tax

Despite the name, there is no standalone capital gains tax in Australia. Capital gains are added to your assessable income and taxed at your marginal income tax rate alongside your other earnings.

If you earn $80,000 in wages and realise a $20,000 capital gain in the same year, your assessable income is $100,000 (before any applicable discount). The $20,000 gain is taxed at whatever marginal rate applies to income in that range.

What assets attract CGT?

Most assets are subject to CGT. Common ones include:

• Shares and ETFs: listed and unlisted securities, units in managed funds
• Cryptocurrency: treated as property, not currency, by the ATO
• Investment property: land and buildings held to produce rental income or capital growth
• Collectables: artwork, jewellery, coins, and similar items acquired for over $500
• Personal use assets: boats, caravans, and similar assets with a cost over $10,000
• Foreign currency: gains from currency movements in foreign cash or deposits

Assets that are generally not subject to CGT include: your main residence (subject to the exemption conditions), cars and motorcycles, assets used solely for personal use below the thresholds above, and assets held in a complying superannuation fund in pension phase.

Understanding your cost base

The cost base is what you subtract from your sale proceeds to calculate the capital gain. A higher cost base means a smaller gain, so correctly recording everything eligible is important.

The ATO recognises five elements of a cost base:

• 1. The purchase price: what you paid for the asset, or the market value of property you exchanged for it
• 2. Incidental costs of acquisition: brokerage fees, legal and conveyancing fees, stamp duty (for property), valuation costs, and transfer fees paid at purchase
• 3. Costs of ownership: non-capital ongoing costs such as insurance, maintenance, and borrowing costs, but only where they cannot be claimed as a tax deduction and the asset produces assessable income. Applies mainly to investment property.
• 4. Capital expenditure: costs that increased the value of the asset or preserved your ownership rights, such as renovations on a property
• 5. Incidental costs of disposal: brokerage, legal fees, and agent commissions paid when selling the asset. These can alternatively be deducted from your capital proceeds: the result is the same either way.

For shares and ETFs, elements 1, 2, and 5 are most commonly relevant. For investment property, all five elements may apply.

Capital proceeds

Capital proceeds are what you receive when you dispose of an asset. Usually this is the sale price, but the ATO can substitute the market value in certain circumstances, for example, where assets are sold to a related party below market value, or given away.

The market value substitution rule prevents investors from artificially reducing a gain by transacting at below-market prices with family members or associated entities.

The 50% CGT discount

If you hold an asset for more than 12 months before selling, only half the capital gain is included in your assessable income. This is the 50% CGT discount, the most significant concession available to individual investors.

Example: you buy shares and sell them 18 months later, realising a $40,000 gain. With the discount, only $20,000 is added to your assessable income. At a 30% marginal rate, the tax is $6,000 rather than $12,000.

The 50% discount is available to individual Australian residents and certain trusts. Companies do not receive the discount, they pay tax on the full gain, which is one reason personal ownership structure matters for long-term investment tax planning.

Inside superannuation, a different rate applies: the effective rate on a long-term gain in accumulation phase is 10% (15% fund tax less a one-third discount on the gain). In pension phase, there is no CGT at all.

Capital losses

A capital loss arises when you sell an asset for less than its cost base. Capital losses can only offset capital gains, they cannot be deducted against ordinary income like wages or rental income.

Unused capital losses carry forward indefinitely and are applied in the year a gain arises. The ATO requires losses to be applied to the full capital gain before the 50% discount is calculated, not after. This sequencing matters: applying a loss to a discountable gain before halving it gives a better outcome than applying it after.

The ATO has also flagged "wash sales", where an investor sells an asset to realise a loss and then immediately repurchases the same asset to reset the cost base. The ATO considers this tax avoidance and can disallow the loss in these circumstances.

Shares and ETFs

Each purchase of shares or ETF units forms a separate "parcel" with its own cost base and acquisition date. When you sell, you decide which parcels are being disposed of, and each parcel's own date determines whether the 50% discount applies.

Choosing which parcels to sell

Common approaches include selling the earliest-purchased parcels first (FIFO), or specifically identifying the parcels with the highest cost base to minimise the gain on each sale. You can also choose to sell parcels outside the 12-month window first to protect discountable parcels for later. The ATO does not mandate a single method.

Dividend reinvestment plans (DRPs)

When an ETF or managed fund automatically reinvests distributions into new units, each reinvestment is treated as a separate acquisition. The cost base of each DRP unit is the market value at the time of reinvestment, and the holding period for the 50% discount starts from that date, not from when you first purchased the fund. Investors with long DRP histories can accumulate dozens of micro-parcels requiring individual tracking.

Corporate actions

Company mergers, demergers, share splits, and consolidations can affect your cost base and holding period. These events often come with ATO guidance specific to each corporate action. Keep all corporate action notifications and update your parcel records accordingly.

Cryptocurrency

The ATO treats most cryptocurrency as property for tax purposes, not as a foreign currency. This means every time you dispose of crypto, including exchanging it for another cryptocurrency, using it to pay for goods or services, or selling it for Australian dollars, a CGT event occurs.

Each crypto-to-crypto swap is two events: a disposal of the crypto you sent (potentially creating a gain or loss at the AUD value at the time), and an acquisition of the crypto you received (with a cost base equal to the AUD value at that time).

The 50% CGT discount applies to cryptocurrency held for more than 12 months before disposal, in the same way as other assets.

Staking and mining rewards

Crypto received through staking or mining is generally treated as ordinary income at the AUD market value when received, not as a capital gain. However, when you later sell those staking rewards, a separate CGT event arises on any gain above the amount initially treated as income.

Record keeping for crypto

The ATO expects records of every transaction: the date, the amount in AUD, the type of crypto, and the purpose. Because blockchain history is public, the ATO can and does cross-reference exchange data. Several dedicated crypto tax platforms can import transaction history from major exchanges and calculate the CGT position automatically.

Investment property

When you sell an investment property, CGT applies to the gain above the cost base. The cost base for property is typically more substantial than for shares, because it includes:

• Purchase price
• Stamp duty and transfer costs
• Legal and conveyancing fees at purchase
• Building, pest, and other pre-purchase inspection fees
• Capital improvement costs (renovations that add value, not repairs)
• Selling costs: real estate agent commissions and legal fees at sale

Ongoing deductible expenses such as loan interest, property management fees, council rates, and repairs are claimed as deductions in your tax return each year, they do not form part of the CGT cost base. This is an important distinction: claiming deductions annually does not reduce your cost base; they are separate from the CGT calculation.

The 50% discount applies to investment property held for more than 12 months. For a property held five years with a $200,000 gain, only $100,000 is assessable income at sale.

The main residence exemption

Your primary home is generally exempt from CGT. If you own and live in a property as your main residence for the entire period of ownership, any capital gain on sale is not assessable.

The exemption can be partial if the property was used to produce income at any point, for example, renting it out or running a genuine dedicated home office. It can also be affected if the property was not your main residence from the date of purchase.

The six-year rule provides flexibility for temporary rentals: if you rent your former home while living elsewhere, you can treat it as your main residence for up to six years for CGT purposes, provided you do not elect another property as your main residence during that period.

CGT inside superannuation

Assets held in a super fund are subject to CGT, but at more favourable rates than outside super:

• Accumulation phase: gains taxed at 15%, or 10% for assets held more than 12 months (a one-third discount applied to the fund's 15% rate)
• Retirement (pension) phase: no CGT on assets backing a retirement pension, gains are entirely exempt

This is one reason super is a highly tax-effective vehicle for long-term investing, and why some investors consider holding higher-growth assets inside super where they will benefit most from these concessions.

Timing your sale

Because capital gains are taxed at your marginal rate in the year of sale, when you sell can matter as much as what you sell.

Selling in a year with lower income (after parental leave, while reducing hours, or in early semi-retirement), means the gain falls into lower tax brackets. Conversely, realising a large gain in a year already at the top bracket means the full gain is taxed at 45%.

The 12-month holding threshold is also worth planning around. Selling an asset at the 11-month mark means the full gain is assessable. Holding for more than 12 months halves the assessable gain. For a $100,000 gain at a 37% rate, the difference between an 11-month and 13-month holding is $18,500 in additional tax.

Record keeping

The ATO requires records sufficient to calculate your cost base and any capital gains or losses for each asset. These must be kept for five years after you lodge the tax return in which the gain or loss is reported, not five years from the date of sale.

For shares and ETFs

Keep every buy and sell confirmation, including date, number of units, unit price, and brokerage fee. For DRP units, keep each reinvestment statement. For corporate actions, keep all notifications from the company or registry. Most share registries maintain historical records, but relying on them means no backup if the registry changes systems.

For investment property

Keep the contract of sale for purchase and sale, all invoices for stamp duty, conveyancing, inspections, and improvements. Keep council rate notices and body corporate levy records that document the ownership period. Renovation receipts should be kept with the asset records, not just in general tax records.

For cryptocurrency

Export transaction history from every exchange or wallet you use. Record the AUD value at the time of each transaction. Several software platforms connect to exchanges via API and can produce compliant CGT reports automatically.

Common mistakes

Not tracking the cost base accurately

The cost base includes the purchase price plus all allowable incidental costs. For shares bought through a platform over many years, reconstructing parcel-level records from scratch at tax time is far harder than keeping records from the start. Every brokerage confirmation should be filed immediately.

Overlooking DRP parcels

Each distribution reinvestment creates a new parcel with its own cost base and acquisition date. Investors with five years of quarterly DRP reinvestments may have 20 separate micro-parcels per fund. Selling units without tracking these parcels results in an incorrect gain calculation.

Selling just before the 12-month mark

Selling at the 11-month mark forfeits the 50% discount entirely. For a significant position, the cost of waiting an extra month or two is often zero. This is a simple planning point that is surprisingly often missed.

Assuming the family home is always CGT-free

The main residence exemption can be partial or fully lost if the property was ever rented out, used for a genuine home business, or was not your main residence from the date of purchase. Checking the specific facts before selling avoids unexpected CGT bills.

Frequently asked questions

Official sources

• Australian Taxation Office - capital gains tax, the 50% discount, cost base, and record-keeping requirements

Looking for just the key figures? See the Capital Gains Tax quick-reference sheet.