How CGT on Shares Works in Australia
When you sell shares for more than you paid, the profit is a capital gain. Per the ATO, this gain is added to your assessable income for the year of sale and taxed at your marginal rate. If you held the shares for more than 12 months, you qualify for the 50% CGT discount — only half the gain is taxable. The CGT event occurs on the date you enter the contract to sell, not settlement date (T+2 for ASX shares).
What Is Your Cost Base for Shares?
Your cost base includes:
- The amount you paid for the shares
- Brokerage fees on purchase
- Brokerage fees on sale (reduces your capital proceeds)
- Costs of managing the investment (some conditions apply)
For shares purchased multiple times, you must track each parcel separately with its own purchase date and price. Most modern brokers (CommSec, SelfWealth, Superhero) provide tax reports showing your cost base per parcel. Using the "first in, first out" (FIFO) method vs specific parcel identification can significantly affect your CGT outcome.
CGT on ETFs — Same Rules, Different Complexity
Exchange traded funds (ETFs) follow the same CGT rules as individual shares — the 50% discount applies after 12 months. However, managed fund ETFs may also distribute capital gains annually even without you selling, which creates a CGT event for holders. Check your ETF's annual tax statement carefully — unexpected capital gains distributions are one of the most frequently missed CGT items in Australian tax returns. ETFs structured as trusts (most Australian ETFs) pass capital gains through to unitholders each financial year.
Wash Sales — The ATO Is Watching
A "wash sale" involves selling shares at a loss to crystallise a capital loss, then repurchasing the same shares shortly after to maintain market exposure. The ATO considers wash sales to be tax avoidance if the dominant purpose is to create a tax deduction without genuinely intending to dispose of the asset. While there is no fixed "wash sale" period in Australian law (unlike the US), the ATO's general anti-avoidance provisions (Part IVA) can apply. Waiting at least 30 days before repurchasing significantly reduces risk of ATO scrutiny.
Worked Example — $50,000 Share Portfolio Sale
| Scenario | Gross Gain | After 50% Discount | Tax (37% rate) | Net After Tax |
|---|---|---|---|---|
| Held under 12 months | $20,000 | $20,000 | $7,400 | $12,600 |
| Held over 12 months | $20,000 | $10,000 | $3,700 | $16,300 |
| Tax saving from holding 12+ months | $3,700 | +$3,700 | ||
Frequently Asked Questions
Do I pay CGT every year I hold shares in Australia?
No — CGT is only triggered when a CGT event occurs, such as selling shares, converting shares, or certain corporate actions. Simply holding shares does not create CGT. Dividends received are assessable income, not capital gains.
Can I offset share losses against property gains?
Yes. Capital losses from any source (shares, crypto, property) can be offset against capital gains from any other source. The ATO requires you to apply capital losses before applying the 50% CGT discount. Losses carry forward indefinitely if unused.
Is dividend reinvestment subject to CGT in Australia?
Yes. Each DRP (Dividend Reinvestment Plan) acquisition creates a new parcel of shares with a cost base equal to the market value on the acquisition date. When you eventually sell, you'll have multiple parcels to track, each with different cost bases and acquisition dates affecting your 50% discount eligibility.