How Capital Gains Tax Works in Australia: The Complete Guide to CGT on Shares, Property and Crypto (2026)

Sold some shares, an investment property, or crypto this year? The ATO wants its cut — but most Australians pay more capital gains tax than they need to because they don't understand how the system actually works. This guide explains how CGT is calculated, when you qualify for the 50% discount, what records you need to keep, and the legal strategies that can reduce your bill before 30 June.

What Is Capital Gains Tax in Australia?

Capital gains tax (CGT) isn't a separate tax — it's part of your income tax. When you sell an asset for more than you paid for it, the profit (the "capital gain") is added to your taxable income for that financial year and taxed at your marginal rate.

This matters because the timing of when you sell can push you into a higher tax bracket. Sell too many assets in a single year and you could be paying 45 cents on the dollar for gains that would have been taxed at 30 cents if you'd spread them across two financial years.

Which Assets Attract CGT?

CGT applies to most assets acquired after 19 September 1985 (called "post-CGT assets"). The main ones Australians encounter:

• Shares and ETFs — including when you sell units, receive a return of capital, or participate in a corporate restructure
• Investment property — land and buildings held as an investment (not your main residence)
• Cryptocurrency — the ATO treats crypto as a CGT asset, not currency
• Collectibles over $500 — artwork, jewellery, coins, rare books
• Foreign property or shares — including US shares held via an Australian broker
• Business assets — goodwill, intellectual property, licences

What's Exempt from CGT?

• Your main residence — the home you live in is generally CGT-free (with caveats if you've rented it out or used it for business)
• Your car — and other personal-use assets acquired for under $10,000
• Super — assets inside your super fund are taxed under different rules (10% or 15%, not your marginal rate)
• Compensation and insurance payouts — for personal injury or illness
• Pre-20 September 1985 assets — assets acquired before this date are grandfathered

How to Calculate Your Capital Gain (or Loss)

The basic formula is straightforward:

But the "cost base" isn't just what you paid for the asset. It includes five elements:

1. Purchase price — what you paid for the asset
2. Incidental costs of acquisition — brokerage fees, stamp duty, legal fees, valuation costs
3. Ownership costs (non-deductible only) — costs that weren't already claimed as tax deductions (e.g., certain holding costs for vacant land acquired after 1 July 2019 are no longer deductible)
4. Capital improvements — renovations, additions, or structural improvements (not repairs or maintenance)
5. Incidental costs of disposal — agent commissions, legal fees, advertising costs when selling

Worked Example: Selling Shares

If you held the shares for more than 12 months, the 50% CGT discount applies, reducing the taxable gain to $9,980.05. At a marginal rate of 32.5% (plus 2% Medicare Levy), you'd owe about $3,443 in tax — not $6,886.

Worked Example: Selling an Investment Property

That $68,700 discounted gain gets added to your other income for the year. If your salary is $90,000, your total taxable income becomes $158,700 — pushing the gain well into the 37% bracket (and part into the 45% bracket above $150,001). This is why timing matters.

The 50% CGT Discount: The Most Valuable Rule You Need to Know

Australian individual taxpayers (and trusts, but not companies) who hold a CGT asset for at least 12 months before selling it receive a 50% discount on the capital gain. This is the single most powerful CGT concession available and it's worth understanding precisely.

How the 12-Month Rule Works

• The 12 months is measured from the contract date of acquisition to the contract date of disposal — not settlement dates
• For shares, acquisition date is the trade date (the day your buy order executes), not the T+2 settlement date
• You need at least 12 months and one day — selling on exactly the 12-month anniversary does not qualify
• The discount applies after you've offset any capital losses against the gain

Capital Losses: How to Use Them

Not every investment goes up. When you sell an asset for less than its cost base, you make a capital loss. Here's how losses work:

• Capital losses can only offset capital gains — you cannot deduct them against your salary, wages, or other income
• Losses must be applied against gains before the 50% discount is calculated
• Unused capital losses can be carried forward indefinitely until you have capital gains to offset
• You cannot choose which gains to apply losses to — the ATO requires you to offset gains in the most tax-effective order (discount gains first, then other gains)

Worked Example: Capital Loss Offset

Notice the loss is applied first ($20,000 − $8,000 = $12,000), then the discount ($12,000 × 50% = $6,000). If the order were reversed, you'd only get $2,000 of benefit from the loss. The ATO's ordering rule actually works in your favour here.

CGT and Your Main Residence

Your home is generally exempt from CGT under the main residence exemption. But there are several scenarios where the exemption is partial or doesn't apply at all:

The Six-Year Absence Rule

If you move out of your home and rent it out, you can continue to treat it as your main residence for CGT purposes for up to six years — as long as you don't nominate another property as your main residence during that time. If you move back in before six years, the clock resets. This rule is useful for people who relocate temporarily for work or rent out while overseas.

Partial Exemption Scenarios

• Home office with a dedicated room — if you use a room exclusively for work (e.g., as a sole trader), the portion of the home relating to that room may not be exempt. Using a room for both work and personal purposes (the more common setup) generally doesn't trigger CGT
• Renting out part of your home — renting a room on Airbnb means the capital gain is partially assessable for the period and proportion that was rented out
• Subdividing and selling land — selling a block of land subdivided from your main residence is not covered by the main residence exemption

CGT on Cryptocurrency

The ATO has made it clear that cryptocurrency is a CGT asset — not a currency. Every disposal is a CGT event, including:

• Selling crypto for AUD or any other fiat currency
• Trading one crypto for another (e.g., swapping BTC for ETH)
• Using crypto to pay for goods or services
• Gifting crypto to someone else
• Converting crypto to a stablecoin — even USDT or USDC triggers a CGT event

Each of these events requires you to calculate the capital gain or loss at the time of disposal. If you've made dozens or hundreds of trades, you'll likely need crypto tax software (Koinly, CryptoTaxCalculator, or Syla are popular Australian options) to generate an accurate report.

The 50% CGT discount applies to crypto held for more than 12 months, just like shares. However, the "personal use asset" exemption (for crypto acquired for under $10,000 and used to purchase goods or services) is interpreted very narrowly by the ATO — if you held the crypto as an investment at any point, it doesn't qualify.

Legal Strategies to Reduce Your CGT Bill

These are legitimate, ATO-compliant strategies — not loopholes. They're about timing and structuring, not avoidance.

1. Hold for at Least 12 Months

The 50% discount halves your taxable gain. On a $50,000 gain at the 37% bracket, holding 12 months saves you $9,250 in tax. This should be your default strategy for any asset you plan to sell — wait for the discount unless there's a compelling reason not to.

2. Time Your Sales Across Financial Years

If you're selling multiple assets, consider splitting sales across two financial years to avoid pushing yourself into a higher tax bracket. Sell some before 30 June and the rest after 1 July.

3. Harvest Capital Losses Before 30 June

If you hold investments that are sitting at a loss and you have realised capital gains during the year, consider selling the losing investments before 30 June to crystallise the loss and offset it against your gains. You can buy back into a similar (but not identical) investment afterwards — though be aware the ATO may scrutinise "wash sale" arrangements where you sell and immediately repurchase the same asset solely to generate a tax loss.

4. Use the Main Residence Exemption Strategically

If you're deciding between selling your home (CGT-free) and an investment property (CGT applies), remember the main residence exemption is one of the most valuable concessions in the tax system. Think carefully before converting your home into an investment property — the CGT clock starts ticking from the date you move out (though the six-year rule provides a buffer).

5. Contribute to Super Before Selling

Making a personal deductible super contribution in the same financial year as a capital gain reduces your overall taxable income. If you're expecting a $40,000 capital gain, contributing $20,000 to super as a concessional contribution reduces your taxable income by $20,000 — potentially saving $6,900 in tax at the 37% marginal rate (you'll pay 15% contributions tax inside super instead).

6. Sell in a Low-Income Year

If you're between jobs, on parental leave, taking a career break, or retiring, your marginal rate will be lower — making it an ideal time to realise capital gains. The same $50,000 discounted gain that costs $17,250 at the 37% bracket only costs $4,825 if your total taxable income stays under $45,000.

CGT and ETF Distributions

If you hold ETFs (as covered in our ETF investing guide), you'll receive an AMMA (Attribution Managed Investment Trust Member Annual) tax statement each year. This statement often includes a "CGT concession" or "discount capital gain" component — this is the ETF passing through capital gains it realised from selling stocks within the fund.

You must include these in your tax return even if you reinvested the distribution. The discount component has already been halved by the fund, so you report it as a "discounted capital gain" on your return. Your ETF provider's tax statement will show exactly how to report each component.

Record-Keeping: What the ATO Expects

The ATO requires you to keep records of every CGT asset for at least five years after the CGT event (i.e., five years after you sell). For assets you still hold, records must be kept for the entire period of ownership plus five years after disposal. This means records for a property held for 15 years must be kept for 20 years.

For each asset, keep:

• Proof of purchase — contract of sale, broker confirmation, exchange receipt
• Cost base records — receipts for brokerage, stamp duty, legal fees, renovations
• Proof of sale — contract of sale, broker trade confirmation, exchange records
• Dividend/distribution reinvestment records — DRP statements showing additional shares acquired (each DRP purchase is a separate parcel with its own cost base and acquisition date)
• Corporate action records — share splits, consolidations, mergers, demergers, return of capital events

The 2025–26 Tax Brackets and What They Mean for CGT

Since capital gains are added to your taxable income, the tax brackets determine how much you actually pay:

Plus the 2% Medicare Levy on all taxable income above the threshold. So the effective top rate on capital gains is 47%.

Common CGT Mistakes Australians Make

1. Forgetting That Crypto Swaps Are CGT Events

Every crypto-to-crypto trade is a disposal. Swapping $5,000 of Bitcoin for Ethereum triggers CGT on the Bitcoin, even though you never converted to AUD. The ATO receives data directly from Australian exchanges and has matched records for millions of transactions.

2. Selling One Day Too Early and Losing the 50% Discount

Selling on the 12-month anniversary instead of the day after costs you the entire 50% discount. On a $30,000 gain at a 37% marginal rate, that's an extra $5,550 in tax for one day's impatience.

3. Not Including All Cost Base Elements

Stamp duty, legal fees, agent commissions, and capital improvements all reduce your gain. Forgetting to include a $15,000 kitchen renovation in your investment property's cost base means overpaying tax by up to $3,488 (at the 37% + Medicare rate, after the 50% discount).

4. Ignoring DRP Parcels

Dividend reinvestment plans create new share parcels with their own cost base and acquisition date. If you've been in a DRP for 10 years and sell all your shares, you have dozens of separate parcels to account for — not just your original purchase. Getting this wrong means either overpaying (if you forget the DRP shares had a cost base) or underpaying and facing an ATO adjustment.

5. Not Reporting Small Capital Gains

There is no minimum threshold for reporting capital gains. Even a $50 profit from selling shares must be reported. The ATO receives data directly from share registries and brokers, so they already know about your transactions.

EOFY CGT Checklist

The Bottom Line

Capital gains tax isn't complicated once you understand the mechanics: calculate your cost base properly, hold for 12 months to get the discount, use losses to offset gains, and time your sales to minimise your marginal rate. The biggest savings come from planning ahead — not from clever tricks after the fact.

If you've sold an investment property, have complex crypto trading history, or expect a capital gain above $50,000, it's worth paying for a tax agent. The fee is tax-deductible and the savings from getting the cost base and timing right will almost certainly outweigh the cost.