Capital gains tax (CGT) in Australia is not a separate tax — it is the portion of your income tax that applies when you make a profit from selling a capital asset. A capital gain is included in your assessable income for the year you sell the asset and taxed at your marginal income tax rate.
The most important feature of Australian CGT is the 50% discount: if you held the asset for more than 12 months before selling, only half the net capital gain is added to your taxable income. This effectively halves the tax burden for long-term investors.
What Is a Capital Gain?
A capital gain arises when you receive more for an asset than its cost base (broadly, what you paid for it plus associated costs). A capital loss arises when you receive less.
Capital gain = Capital proceeds − Cost base
If your proceeds are less than the cost base, you have a capital loss. Capital losses can only be used to offset capital gains — they cannot reduce other income such as salary or business income. Any unused capital losses are carried forward to future income years.
What Is a CGT Event?
The ATO lists dozens of CGT events in the Income Tax Assessment Act 1997. The most common is CGT Event A1 — the disposal of a CGT asset by sale, gift, or transfer.
Common events that trigger a capital gain or loss:
| CGT Event | What Triggers It |
|---|---|
| A1 — Disposal | Selling, gifting, or transferring a CGT asset |
| B1 — Use and enjoyment | Use of an asset before title passes |
| C1–C3 — End of asset | Destruction, cancellation, or expiry |
| E1–E2 — Trust events | Creating or transferring to a trust |
| K3 — Deceased estate | Assets passing from a deceased estate |
Which Assets Are Subject to CGT?
CGT applies to most assets acquired after 20 September 1985 (“post-CGT assets”), including:
- Shares and managed funds (ASX and international)
- ETFs
- Cryptocurrency
- Investment properties
- Vacant land
- Business assets
- Foreign currency (in some cases)
Assets generally exempt from CGT:
- Your main residence (subject to conditions)
- Personal use assets acquired for $10,000 or less (e.g., a car, furniture)
- Collectables acquired for $500 or less
- Compensation for personal injury
- Pre-CGT assets (acquired before 20 September 1985)
The 50% CGT Discount
If you are an individual or trustee (not a company) and you held the asset for more than 12 months, you may reduce the capital gain by 50% before including it in your taxable income.
Example: You sell shares for a $20,000 capital gain and held them for 18 months.
- Apply the 50% discount: $20,000 × 50% = $10,000 taxable gain
- The $10,000 is added to your other income and taxed at your marginal rate
Capital losses must be applied to reduce the gain before the 50% discount is applied, not after.
How Capital Losses Work
Capital losses are quarantined — they can only offset capital gains, not other income. Any net capital loss is carried forward indefinitely until you have a capital gain to offset it against.
Example: You have a $5,000 capital gain from selling ETFs and a $3,000 capital loss from selling crypto.
- Net gain: $5,000 − $3,000 = $2,000
- Apply 50% discount (if held >12 months): $1,000 taxable
How to Report a Capital Gain
Capital gains are reported in your income tax return in the Capital gains section. You will need:
- Date of acquisition and disposal
- Cost base (purchase price plus eligible costs)
- Capital proceeds (sale price plus any other consideration received)
- Whether the 50% discount applies
Records must generally be kept for 5 years after you dispose of an asset.
CGT and HECS-HELP
Capital gains increase your Repayment Income for HECS-HELP purposes. If a large capital gain pushes your repayment income above the minimum threshold (~$54,435 for FY2025–26), you may be required to make a compulsory HECS repayment — even if you have not received the cash yet (for example, if you sold shares but haven’t lodged your return).
Related Articles
- The 50% CGT Discount — who qualifies and how to apply it
- CGT on Shares — selling ASX shares and ETFs
- CGT on Investment Property — property-specific rules
- CGT on Cryptocurrency — ATO treatment of crypto
- Main Residence CGT Exemption — when your home is exempt
- Capital Gains Tax Australia hub — full topic index
Frequently Asked Questions
Is CGT a separate tax in Australia? No. Capital gains are included in your assessable income and taxed at your marginal income tax rate. The 50% discount reduces the amount of the gain that is included.
When do I pay CGT in Australia? You pay CGT as part of your income tax when you lodge your annual tax return. If you are a pay-as-you-go (PAYG) earner with a large capital gain, the ATO may issue a variation or you may need to pay quarterly instalments.
Can I offset a capital loss against my salary? No. Capital losses can only reduce capital gains, not other types of income. Unused capital losses carry forward to future years.
Do I pay CGT if I give an asset away? Yes. Gifting an asset is a CGT event. The proceeds are generally taken to be the market value of the asset at the date of the gift.
This article provides general tax information for FY2025–26. CGT rules are complex and depend on your individual circumstances. For advice tailored to your situation, speak with a registered tax agent or accountant. Find one through the Tax Practitioners Board register.