Tax on Shares in Australia — How Share Investing Is Taxed
This article provides general information only and does not constitute financial advice. For advice tailored to your situation, consult a licensed financial adviser. Learn more.
Contents
Investing in Australian shares generates two types of taxable income: dividends (income received while holding shares) and capital gains (profit realised when you sell). These are taxed differently — dividends are included in your assessable income in the year they are received, while capital gains are included when the disposal occurs. If you held the shares for more than 12 months, a 50% CGT discount may significantly reduce the taxable gain.
The Two Tax Events When Investing in Shares
1. Dividends — Taxed When Received
When a company pays a dividend, the amount is included in your assessable income for that financial year. Australian company dividends often come with franking credits — a credit for the corporate tax the company has already paid on those profits. These credits reduce your personal tax bill (and can generate a refund if your tax rate is below the company rate).
See Dividend Tax Australia and Franking Credits Explained for full details.
2. Capital Gains — Taxed When You Sell
When you sell shares at a profit, a capital gain arises. The gain is the difference between:
$$\text{Capital gain} = \text{Sale proceeds} - \text{Cost base}$$
The cost base generally includes the purchase price plus brokerage paid on acquisition. Brokerage on sale is deducted from proceeds (reducing the gain).
The gain is included in your assessable income in the year of sale and taxed at your marginal rate — but a 50% discount applies if you held the shares for more than 12 months.
Example:
- Bought 500 shares at $10.00 each = $5,000 cost (plus $15 brokerage = $5,015 cost base)
- Sold at $18.00 each = $9,000 proceeds (minus $15 brokerage = $8,985 net proceeds)
- Capital gain = $8,985 − $5,015 = $3,970
- If held > 12 months and taxed at 34.5% (32.5% + 2% Medicare): taxable gain after 50% discount = $1,985 × 34.5% = $685 tax
Short-Term vs Long-Term Shareholding
| Holding period | CGT treatment |
|---|---|
| Less than 12 months | Full gain included in assessable income |
| 12 months or more | 50% CGT discount — only half the gain is taxable |
The 12-month holding period is counted from the day after you acquired the shares to the day you disposed of them (settlement date to settlement date for ASX shares).
Shares Held in a Company or Trust
The CGT discount treatment differs by entity:
| Investor type | CGT discount available? |
|---|---|
| Individual | ✅ 50% discount (held > 12 months) |
| Complying superannuation fund | ✅ 33.33% discount (held > 12 months) |
| Trust (distributing to individual beneficiaries) | ✅ 50% (beneficiary level) |
| Company | ❌ No discount |
Capital Losses and Shares
If you sell shares at a loss, you have a capital loss. Capital losses:
- Can offset capital gains in the same year
- Can be carried forward indefinitely to offset future capital gains
- Cannot be used to offset other income (salary, dividends, rental income)
See Tax Loss Harvesting Australia for strategies around managing capital losses.
Wash Sale Rules
The ATO applies the wash sale doctrine to prevent artificial capital loss creation. If you sell shares to crystallise a loss and immediately repurchase the same shares with no genuine change in economic position, the ATO may disallow the loss. There is no fixed “30-day rule” in Australian law as there is in some other countries, but a genuine change in investment position is required for a capital loss to be recognised.
Reporting Share Income
Share income — both dividends and capital gains — must be reported in your annual tax return. The ATO’s pre-fill service downloads dividend data from share registries, but you should verify accuracy and include any gains or losses from sales yourself. See How to Report Share Income on Your Tax Return.
Related Articles
- Dividend Tax Australia — How Dividends Are Taxed
- Franking Credits Explained
- How to Report Share Income on Your Tax Return
- Capital Gains Tax on Shares
- Tax on Investments hub
- Taxes hub
Frequently Asked Questions
Do I pay tax on unrealised gains? No. Australian tax law taxes capital gains only when you dispose of an asset. Unrealised gains (the increase in value of shares you still hold) are not taxable until you sell.
Are shares in my super fund taxed differently? Yes. Inside a superannuation fund, investment earnings (including dividends and capital gains) are taxed at a concessional rate of 15% in the accumulation phase. The 50% CGT discount for assets held over 12 months still applies, effectively reducing the rate on long-term gains to 10%.
Can I deduct the interest on a loan I took out to buy shares? Yes — interest on money borrowed to buy income-producing investments (like dividend-paying shares) is generally tax-deductible. If the shares do not pay dividends, the deductibility may be questioned. See Investment Deductions.
This article provides general tax information. For advice tailored to your situation, speak with a registered tax agent. Find one through the Tax Practitioners Board register.