Capital Gains Tax in Australia Explained: Complete Guide

Capital Gains Tax (CGT) is the tax Australians pay on the profit made when they sell or dispose of a capital asset. It is not a separate tax; capital gains are added to your assessable income for the year and taxed at your marginal income tax rate. The key rule that changes the practical impact: individuals and trusts who have held an asset for more than 12 months are entitled to a 50% CGT discount, which halves the taxable gain. Companies are not eligible for this discount.

CGT applies to investment properties, shares, ETFs, cryptocurrency, and business assets. It does not apply to your family home (under the main residence exemption) or most cars. Understanding CGT is essential for anyone who invests, sells property, or receives assets through inheritance.

This guide covers what CGT is, which assets are affected, how to calculate your CGT liability, how the 50% discount works, and recent legislative changes that affect property investors. For personalised CGT advice, see our capital gains tax services in Adelaide.

What Is Capital Gains Tax in Australia?

Capital Gains Tax in Australia is the tax liability that arises when you make a capital profit on the disposal of a capital asset. A disposal includes: selling an asset, gifting it, exchanging it for another asset, a company buying back its own shares, or an asset being lost, destroyed, or compulsorily acquired.

CGT was introduced on 20 September 1985. Assets acquired before this date are referred to as pre-CGT assets and are generally exempt from CGT when disposed of. If you purchased an asset before 20 September 1985 and have never made capital improvements to it, you will generally pay no CGT when you sell it.

CGT is not calculated separately. The net capital gain for the year is added to your other assessable income (wages, rent, dividends) and taxed at your marginal income tax rate. This means your CGT rate depends on your total income for the year, not a fixed CGT rate. See the ATO’s What is capital gains tax page for the official framework.

Which Assets Are Subject to CGT in Australia?

CGT applies to a wide range of assets but not all. Understanding what is and is not subject to CGT prevents both under-reporting and unnecessary compliance work.

How Does CGT Work? A Step-by-Step Calculation

Calculating your capital gain involves five steps:

Step 1: Determine the CGT event. The most common is CGT Event A1: the disposal of a CGT asset. This is triggered when you sell an investment property, shares, cryptocurrency, or any other CGT asset.

Step 2: Work out the capital proceeds. This is the amount you received (or are entitled to receive) for the asset. For a sale, it is the sale price minus incidental disposal costs (agent commissions, legal fees).

Step 3: Work out the cost base. The cost base is made up of:

• 
  Original acquisition cost: the amount you paid for the asset
• 
  Incidental acquisition costs: stamp duty, legal fees, and other costs directly related to acquiring the asset
• 
  Ownership costs: costs of owning the asset that you did not claim as tax deductions (e.g. some borrowing costs)
• 
  Capital improvement costs: expenditure that increased the asset’s value or extended its useful life
• 
  Incidental disposal costs: agent commissions, legal fees, and advertising costs on sale

Step 4: Calculate the gross capital gain. Gross capital gain = proceeds minus cost base. If the cost base is higher than the proceeds, you have a capital loss, not a gain. Capital losses cannot be deducted against ordinary income. They are carried forward and offset against future capital gains.

Step 5: Apply the CGT discount (if eligible). If you held the asset for more than 12 months before disposal and you are an individual or trust (not a company), multiply the gross capital gain by 50% to arrive at your taxable capital gain.

Worked Example: Investment Property Sale

The following example shows how CGT is calculated on the sale of an investment property held for four years:

When Is Capital Gains Tax Payable?

CGT is payable as part of your income tax for the financial year in which the CGT event occurred. If you sold an investment property in December 2025, the capital gain is included in your tax return for the year (due by 31 October, or 15 May 2027 if lodging through a registered tax agent).

If you regularly make capital gains (for example, you are an active share or property investor), the ATO may raise PAYG instalment notices requiring you to make quarterly prepayments toward your estimated income tax liability. This prevents a large lump-sum tax bill at year-end and applies automatically once your tax liability exceeds the ATO’s threshold.

Capital gains do not need to be paid immediately when the disposal occurs. You pay the tax in your annual return or through PAYG instalments, but the legal obligation arises in the year the CGT event happens.

How to Reduce Your Capital Gains Tax in Australia

1. Hold the Asset for More Than 12 Months (50% Discount)

The single most effective way to reduce CGT for individuals and trusts is to hold the asset for more than 12 months before disposing of it. This entitles you to the 50% CGT discount, which halves your taxable capital gain. In the worked example above, the gross gain of $224,000 became a taxable gain of $112,000. Companies do not qualify for this discount.

2. Offset Capital Gains with Capital Losses

Capital losses from the disposal of other assets must be applied against capital gains in the same financial year. Any remaining capital losses can be carried forward indefinitely to offset future capital gains. You cannot apply capital losses against ordinary income (salary, rent, business income). Strategic timing of asset disposals to match gains with losses can meaningfully reduce the net taxable gain for the year.

3. Main Residence Exemption

If the property you are selling has been your main residence throughout your entire period of ownership, it is fully exempt from CGT. This is the most valuable CGT exemption in Australia. Conditions: the property must not have been used to produce income (renting it out, running a business) during your ownership. If it was used for income purposes for any period, only a partial exemption applies, calculated on a time basis.

4. Small Business CGT Concessions

Eligible small businesses can access four additional CGT concessions when selling active business assets. Eligibility requires either annual aggregated turnover under $2 million or net assets under $6 million. The four concessions are: the 15-year exemption (full exemption for assets held 15+ years), the 50% active asset reduction, the retirement exemption (up to $500,000 lifetime cap), and the rollover (defer CGT when replacing an asset). For business owners planning an exit, accessing these concessions can reduce or eliminate a substantial CGT liability. See our business tax advisory services for exit planning support.

5. Time the Disposal to Manage Your Marginal Rate

Because CGT is taxed at your marginal rate, the tax you pay on the same capital gain can differ significantly depending on when you dispose of the asset and what your total income is that year. Selling an asset in a year when your income is lower (for example, after retirement or in a year with business losses) can reduce the marginal rate applied to the gain. This is a tax planning decision that should be considered with your registered tax agent before executing the sale.

CGT on Property in Australia

Investment Properties

All investment properties are subject to CGT when you dispose of them. The 50% CGT discount applies if you have owned the property for more than 12 months. The cost base includes the purchase price, stamp duty, legal fees at purchase, capital improvements, borrowing costs not claimed as deductions, and disposal costs. Interest and repairs claimed as deductions over the years are not included in the cost base. See our investment property tax return guide for the full treatment.

Main Residence Exemption

Your family home (principal place of residence) is generally exempt from CGT. The full exemption applies if the property was your main residence for the entire period of ownership and was never used to produce income. If you rented out a room, operated a business from home, or rented out the property for any period, a partial CGT exemption applies. The partial exemption is calculated by apportioning the total gain on the basis of the number of days the property was not your main residence as a proportion of total ownership days.

Inherited Properties

When you inherit a property, CGT generally does not apply at the time of inheritance. However, when you later dispose of the inherited asset, CGT may apply based on the following rules:

• 
  Property acquired by deceased after 20 September 1985: you inherit the property at the deceased’s cost base or the market value at date of death (depending on circumstances).
• 
  Property acquired by deceased before 20 September 1985 (pre-CGT): you are taken to have acquired the property at its market value at the date of death. If you then sell within 2 years of the date of death, the property may be exempt.
• 
  Deceased's main residence: if the property was the deceased’s main residence, a special 2-year transitional period exemption may apply, giving beneficiaries time to sell without CGT.

CGT on Shares and ETFs

Every time you sell shares or units in an ETF, a CGT event occurs. The cost base is the price you paid for the shares plus brokerage on purchase. The proceeds are the sale price minus brokerage on sale. If you have held the shares for more than 12 months, the 50% discount applies.

Dividend Reinvestment Plans (DRPs): when dividends are reinvested as additional shares, you acquire those shares at their market value on the reinvestment date. Each DRP acquisition creates a new cost base at that date. These are frequently overlooked in cost base calculations.

Share buy-backs: where a company buys back its own shares, the buy-back price may be partly capital and partly dividend, depending on how the buy-back is structured. The ATO’s guidance on each specific buy-back determines the CGT treatment.

CGT on Cryptocurrency in Australia

Cryptocurrency is treated as a CGT asset in Australia. Every time you dispose of cryptocurrency, a CGT event occurs. Disposal includes: selling crypto for Australian dollars, exchanging one cryptocurrency for another (crypto-to-crypto swaps), using crypto to pay for goods or services, and receiving crypto as payment.

If you held the cryptocurrency for more than 12 months as an investor (not a trader), the 50% CGT discount applies to the net capital gain. If you are classified as a trader (your cryptocurrency activity constitutes a business), gains are treated as ordinary income, not capital gains, and the 50% discount does not apply. The ATO’s distinction between investor and trader depends on the frequency, scale, and intention behind the activity.

For specialist cryptocurrency CGT advice including the treatment of staking rewards, DeFi activity, airdrops, and NFTs, see our cryptocurrency tax services in Adelaide.

Recent CGT Legislative Changes: What Property Investors Need to Know

Negative Gearing Restrictions (from 1 July 2027)

For residential investment properties purchased after 7:30pm AEST on 12 May 2026, the 2026 Federal Budget introduced restrictions on negative gearing. From 1 July 2027:

• 
  Losses from these properties can only be offset against rental income from the same property, not against other income sources like salary or wages
• 
  The losses that cannot be used in a year can be carried forward and used against rental income in future years or as a capital loss when the property is eventually sold
• 
  Properties purchased before 12 May 2026 at 7:30pm AEST are not affected by these restrictions

This does not directly change how CGT is calculated on these properties, but it does affect the overall tax treatment of new residential investment property purchases, which is relevant to the long-term investment decision.

50% CGT Discount for Affordable Housing: Retained

The 60% CGT discount for investments in affordable housing (introduced earlier) was subject to proposed changes. The 2026 Budget confirmed the affordable housing CGT discount is retained. This applies to eligible investments in social and affordable housing and allows a higher discount rate than the standard 50% available to other investments held for 12+ months.

How The Kalculators Can Help With Your CGT

CGT applies at the intersection of investment decisions, income tax planning, and timing. Getting it wrong costs money; getting it right requires planning before disposal, not after. Our registered tax agents provide capital gains tax advice and calculation services in Adelaide for property investors, share investors, business owners, and cryptocurrency holders.

We review your cost base (including all acquisition costs, improvements, and disposal costs you may have overlooked), apply the correct discount and concessions, and include your net capital gain correctly in your income tax return. For business sales, we assess small business CGT concession eligibility and advise on the structuring of the sale to maximise available exemptions.

If you have already lodged a return and are concerned that your CGT was calculated incorrectly, our second look assessment service reviews lodged returns and lodges amendments where corrections are needed.

Call (08) 7480 2593, Monday to Friday, 9:00 AM to 6:00 PM. Offices at 182 Salisbury Highway, Salisbury; 315 Prospect Road, Blair Athol; and 280 Main South Road, Morphett Vale. Online CGT services for Murray Bridge, Woodville, Melrose Park, Port Augusta, Prospect, and Brighton via info@thekalculators.com.au.