How capital gains tax works in Australia (2025โ26)
CGT isn't a separate tax with its own rate. Your net capital gain is added to your taxable income for the year and taxed at your marginal rate (plus the 2% Medicare levy). That's why the same gain can cost very different amounts depending on your other income โ and why timing matters.
The 50% discount is the big one
If you're an individual and you hold an asset for more than 12 months before selling, you only pay CGT on half the gain โ the 50% CGT discount. Sell at 11 months and the entire gain is taxable; sell at 13 months and half of it disappears from your assessable income. For most people, holding past the 12-month mark is the single biggest CGT lever there is.
What's taxed, what isn't
- Your main residence is generally exempt from CGT.
- Investment property and shares are the usual CGT events.
- Capital losses offset capital gains (not your salary) and carry forward to future years.
- Your cost base includes purchase price plus buying/selling costs and some holding costs โ it reduces the gain.
Worked example: $40,000 share gain
Say you bought shares for $50,000 and sold for $90,000 โ a $40,000 gain. Held over 12 months, the 50% discount applies: only $20,000 is added to your income. At a 30% marginal rate (+2% Medicare) that's about $6,400 in CGT. Held under 12 months, the full $40,000 is taxable โ roughly $12,800. Same trade, double the tax, just for selling a month too early. The calculator above lets you test both holding periods and income levels.
Ways to legally reduce CGT
- Hold for more than 12 months to unlock the 50% discount.
- Realise capital losses in the same year to offset gains (tax-loss selling).
- Time the sale for a year when your other income (and marginal rate) is lower.
- Make a deductible super contribution in the sale year to reduce taxable income.
- Keep every cost record โ purchase costs, improvements and selling costs all lift your cost base and shrink the gain.