Johan Petrovic
Property Investment Adviser · QPIA · 17 years in practice
Specialist in tax strategy for residential investors · Melbourne, VIC
That’s where capital gains tax CGT comes in.
CGT is way more complex for Australians than almost any other part of the tax system, mostly because it isn’t really a separate tax at all. It’s a label the ATO puts on part of your income. Once you understand that one idea, the rest of this guide will make a lot more sense.
Below, we’ll walk through exactly what CGT is, how to calculate a gain or loss, how much tax you can expect to pay, and most importantly what’s changing from 1 July 2027, the biggest shake-up to CGT in decades.
What Is Capital Gains Tax?
Capital gains tax is the tax you pay on the profit you make when you sell (or otherwise dispose of) an asset, think about shares, an investment property, a business, or even a valuable painting.
Here’s the part that catches people out: CGT isn’t a stand-alone tax with its own rate. Any capital gain you make gets added to your other taxable income (salary, business income, rental income) for that financial year, and the whole lot is taxed together at your marginal tax rate. There’s no separate “CGT rate” sitting off to the side.
CGT was introduced in Australia on 20 September 1985. As a rule of thumb, assets you acquired before that date (“pre-CGT assets”) are exempt, though as you’ll see later, that’s about to change.
What is a capital gains tax or capital loss?
Every time you sell or dispose of a CGT asset, that’s called a CGT event. The outcome of that event is either:
- A capital gain — you sold the asset for more than it cost you, or
- A capital loss — you sold it for less than it cost you.
You can offset capital losses against capital gains in the same year, or carry them forward indefinitely to use against future gains. The catch: capital losses can only be used against capital gains. You can’t use them to reduce your salary or business income.
How to work out a gain or loss
Working out a gain or loss comes down to comparing two numbers:
- Capital proceeds: What you received when you sold the asset (sale price, minus selling costs like agent fees or brokerage).
- Cost base: Broadly, what the asset cost you to buy, own, and eventually sell. This includes the purchase price plus incidental costs such as stamp duty, legal fees, agent commissions, and certain holding costs (for property, this can include interest, rates, and insurance if they weren’t already claimed as tax deductions).
The calculation
Step | What you do | Example (shares) |
|---|---|---|
1 | Capital proceeds (sale price − selling costs) | $45,000 |
2 | Cost base (purchase price + buying/selling costs) | $30,000 |
3 | Capital gain = Step 1 − Step 2 | $15,000 |
4 | Held asset for 12+ months? Apply 50% CGT discount (individuals/trusts) | $15,000 × 50% = $7,500 |
5 | Net capital gain (after applying any prior losses) | $7,500 |
6 | Add to taxable income for the year | Taxed at your marginal rate |
The 50% CGT discount is the single biggest lever most individuals have. If you’re an Australian resident and you’ve held the asset for at least 12 months before the CGT event, you only pay tax on half the gain. Companies don’t get this discount; complying super funds get a reduced one-third discount instead.
How much CGT will I pay?
This is the question everyone actually wants answered, and the honest response is: it depends on your total taxable income for the year, because your capital gain simply gets stacked on top of it.
Here are the 2026-27 Australian resident tax brackets (excluding the 2% Medicare levy):
Taxable income | Tax rate on this portion |
|---|---|
$0 – $18,200 | Nil (tax-free threshold) |
$18,201 – $45,000 | 15% |
$45,001 – $135,000 | 30% |
$135,001 – $190,000 | 37% |
$190,001 and over | 45% |
So if your salary is $95,000 and you make a $20,000 net capital gain (after the discount), your taxable income for the year becomes $115,000 — and that extra $20,000 is taxed at your marginal rate (30% in this case), plus the 2% Medicare levy. There’s no separate CGT return or CGT rate; it’s simply reported at the capital gains section (item 18) of your regular tax return.
A quick worked example:
Amount | |
|---|---|
Salary | $95,000 |
Net capital gain (after 50% discount) | $20,000 |
New taxable income | $115,000 |
Approx. extra tax on the gain (30% + 2% Medicare) | ~$6,400 |
Figures are illustrative only, your actual result depends on deductions, offsets, and other income.
What happens if I inherit assets?
Inheriting an asset doesn’t trigger CGT on its own, you don’t pay tax just for receiving it. But the rules that determine your future cost base depend on when the original owner bought it:
Scenario | Your cost base becomes |
|---|---|
Deceased acquired the asset before 20 September 1985 | Market value at the date of death |
Deceased acquired the asset on or after 20 September 1985 | The deceased’s original cost base (carried over) |
The asset was their main residence and meets certain conditions | May remain fully or partially exempt if sold within two years |
If you later sell the inherited asset, that’s when CGT is worked out — using the cost base rules above and the date you (or, in some cases, combined with the deceased’s ownership period) held it.
How to use the Capital Gains Tax calculator
Our CGT calculator is built to take the guesswork out of the maths above. To get an accurate estimate:
The calculator then shows your capital gain, the discount applied, and an estimate of the tax payable — so you know roughly what to set aside before you lodge.
Can you avoid capital gains tax?
You can’t simply “avoid” CGT on an investment asset that’s made a genuine gain — but there are legitimate situations where a gain is exempt or disregarded entirely:
- Your main residence (subject to the main residence exemption rules)
- Assets acquired before 20 September 1985 (pre-CGT assets, for now — see the changes below)
- Certain personal use assets sold for under $10,000
- Depreciating assets used solely for taxable purposes (e.g. business equipment, handled under different rules)
Trying to disguise an investment sale as something else to dodge CGT isn’t a strategy — it’s the kind of thing that draws ATO attention. The realistic approach is reducing your liability using the legitimate methods below.
How can you reduce Capital Gains Tax
12+ months
Unlocks the 50% CGT discount for individuals and trusts
Offset capital losses
Apply losses from other investments against the gain in the same year
Time the sale
Sell in a lower-income year to reduce your marginal rate on the gain
6 year absence rule
If you move out of your main residence, it can still be CGT-exempt for up to six years if not earning rental income (or indefinitely if not rented)
Contribute to super
Small business CGT concessions may allow a portion of the gain to be contributed to super
Records of costs
Every legitimate cost you can add to your cost base reduces the taxable gain
Losing records doesn’t make the gain disappear. It just makes it harder to prove your cost base, which can mean paying tax on a bigger gain than you actually made.
Common Capital Gains Tax situations
Selling an investment property
Full CGT applies; 50% discount if held 12+ months
Selling your main residence
Usually fully exempt
Selling shares or ETFs
CGT applies to the gain; brokerage and buy/sell costs adjust the cost base
Selling crypto assets
Treated as a CGT asset in most cases, not currency — each disposal (including swapping one crypto for another) can be a CGT event
Divorce or separation property transfers
Rollover relief may defer CGT
Inheriting and later selling a property
Cost base depends on when the deceased acquired it
Moving overseas and later selling an Australian asset
Foreign residents don’t get the 50% CGT discount and face different rules
Can Capital Gains Tax rules change?
Yes — and they’re about to, in a significant way. CGT rules have been adjusted several times since 1985 (the discount itself was introduced in 1999, replacing indexation), and the government regularly reviews the system as part of the Federal Budget.
Changes to capital gains tax from 1 July 2027
Following the 2026-27 Federal Budget, the government has legislated the most substantial overhaul of CGT since the discount was introduced. Here’s what’s changing:
Change | Detail |
|---|---|
50% CGT discount replaced | For individuals, trusts and partnerships, the discount is being replaced with cost base indexation similar to the pre-1999 system |
New 30% minimum tax rate | A minimum 30% tax rate will apply to capital gains made from 1 July 2027, regardless of your marginal tax rate |
Pre-CGT assets lose their exemption | Assets bought before 20 September 1985 will no longer be automatically exempt only the portion of the gain that accrued before 1 July 2027 stays exempt |
Transitional apportionment | Gains will generally be split between the old and new rules based on how long the asset was held before and after 1 July 2027 (or via a market valuation at that date) |
Effective date | The new rules apply to gains accruing after 1 July 2027 gains up to that date are assessed under the current rules |
What this means in practice: if you’re holding assets you plan to sell in the next couple of years, the timing of that sale could materially change how much tax you pay. These measures are still working through final ATO guidance, so the practical details (like the exact valuation methodology) may be refined before 1 July 2027.