Capital Gains Tax (CGT) in Australia: Rules, Discounts, Exemptions and Examples

What Is Capital Gains Tax (CGT)?

Capital Gains Tax (CGT) is the tax you may pay when you make a profit from selling or disposing of a capital asset.

In Australia, CGT is not a separate tax. Instead, your net capital gain forms part of your assessable income and may increase the amount of income tax you pay for the financial year.

A capital gain or loss occurs when you dispose of an asset. The gain or loss is generally the difference between what you paid for the asset and what you receive when you dispose of it.

CGT was introduced in Australia on 20 September 1985. Assets acquired before this date are currently exempt from CGT and are commonly referred to as pre-CGT assets. However, under the proposed changes introduced in the 2026-27 Budget, from 1 July 2027, any capital growth on pre-CGT assets will become taxable. For pre-CGT assets, any capital gain that accrued prior to the 1 July 2027 effective date remain tax-exempt.

CGT operates by taxing any increase in value from the time an asset was acquired or created. The resulting gain is generally included in your assessable income in the year the CGT event occurs.

The amount included in your assessable income is known as your net capital gain.

Capital Gains and Capital Losses Explained

A capital gain occurs when you sell or dispose of an asset for more than its cost base.

A capital loss occurs when you sell or dispose of an asset for less than its cost base.

For example, if you purchased shares for $10,000 and later sold them for $18,000, you may have made a capital gain of $8,000 before applying any available CGT discounts, exemptions or capital losses.

Capital losses can generally be used to offset capital gains in the current income year or carried forward to future income years.

Capital losses generally cannot be used to reduce ordinary income such as:
 

• salary and wages 
• business income 
• rental income 

This distinction is important because capital losses only reduce capital gains.

When Capital Gains Tax Applies

CGT applies when a CGT event happens.

A CGT event is a transaction or event that may result in a capital gain or capital loss.

The most common CGT event occurs when you sell or transfer ownership of an asset.

Examples of CGT events include:
 

• selling an investment property 
• selling shares 
• selling managed funds 
• selling or exchanging cryptocurrency 
• gifting an asset to another person 
• transferring ownership 
• receiving compensation for lost or destroyed assets 
• assets being destroyed or lost 
• ceasing Australian tax residency in certain circumstances 

For most assets, the CGT event generally occurs on the contract date rather than the settlement date.

For example, when selling an investment property, CGT is usually triggered when contracts are exchanged, even if settlement occurs in a later financial year.

If no contract exists, CGT generally applies when ownership changes.

Assets Subject to Capital Gains Tax

CGT applies to a wide range of assets, including:
 

• investment properties 
• shares 
• exchange-traded funds (ETFs) 
• managed funds 
• cryptocurrency and digital assets 
• business assets 
• collectables such as artwork, jewellery and antiques 
• vacant land 
• foreign investments 

CGT may also apply when exchanging one cryptocurrency for another cryptocurrency, even if no Australian dollars are received.

The capital gain or capital loss is generally calculated using the market value of the cryptocurrency received at the time of the transaction.

Assets That May Be Exempt From Capital Gains Tax

Some assets may be fully or partially exempt from CGT.

Main Residence Exemption

Your main residence may qualify for a full CGT exemption if all eligibility requirements are satisfied. In broad terms, this commonly applies where:
 

• the property was your main residence throughout the ownership period
• the land is two hectares or less
• no events occurred that would reduce the available exemption

A partial exemption may apply if:
 

• the property was rented out or otherwise used to produce income
• part of the property was used for business purposes
• the property was only your main residence for part of the ownership period

Special rules may also apply to inherited properties, temporary absences and foreign residents. Eligibility for the main residence exemption depends on your individual circumstances.

Personal Use Assets

Personal use assets acquired for $10,000 or less are generally exempt from CGT.

Examples include:
 

• furniture
• household electrical goods
• boats used primarily for personal purposes

Capital losses made on personal use assets are generally disregarded and cannot usually be used to offset capital gains. 

Cars and Motorcycles

Cars and motorcycles are generally exempt from CGT.

Depreciating Assets

Depreciating assets used solely for a taxable purpose are generally not subject to CGT, although different rules may apply where private use is involved.

How Capital Gains Tax Is Calculated

CGT is generally calculated by subtracting an asset's cost base from the capital proceeds received when the asset is sold or disposed of.

Capital Gain = Capital Proceeds − Cost Base

Capital proceeds usually refer to the amount received from selling or disposing of an asset.

The cost base is one of the most important components when calculating CGT.

Understanding the Cost Base

The cost base of an asset generally includes:
 

• the original purchase price 
• stamp duty 
• legal fees 
• brokerage fees 
• selling agent commissions 
• certain capital improvement costs 
• other incidental costs 
• some ownership costs where eligible 

Ownership costs that may form part of the cost base, where eligible, can include:

• interest expenses
• council rates
• land tax
• maintenance costs

These costs are generally only included where they have not already been claimed as a tax deduction or otherwise taken into account for income tax purposes.
 

Using Capital Losses

If you make a capital loss, it can generally be used to offset capital gains in the current income year or carried forward to future income years.

For example, if you made:
 

• a $15,000 capital gain on shares 
• a $5,000 capital loss on cryptocurrency 

your net capital gain may be reduced to $10,000 before applying any available CGT discount.

Investors sometimes realise capital losses to offset capital gains. Any strategy involving the disposal and reacquisition of assets should comply with ATO requirements. Arrangements entered into primarily to generate artificial tax losses, including certain wash sale arrangements, may attract ATO scrutiny.

Understanding the 50% CGT Discount

The capital gains tax discount is one of the most significant tax concessions available to Australian investors.

It allows eligible taxpayers to reduce the taxable portion of a capital gain when selling certain assets held for more than 12 months.

For Australian resident individuals and trusts, the standard CGT discount is 50%.

Complying superannuation funds may receive a one-third discount.

Companies are generally not eligible for the CGT discount.

For example, if an investor makes a capital gain of $100,000 on an eligible investment property held for more than 12 months, only $50,000 may be included in their taxable income after applying the discount.

The discount may apply to:
 

• investment properties 
• shares 
• ETFs 
• managed funds 
• cryptocurrency investments 
• business assets 
• certain collectables 

The CGT discount is one of the key reasons long-term investing can be more tax effective than short-term trading.

Who Qualifies for the CGT Discount?

1. Individuals

Australian resident individuals are generally eligible for the full 50% CGT discount on eligible assets held for at least 12 months.

This commonly applies to:
 

• investment properties 
• shares 
• ETFs 
• managed investments 
• certain business assets 

The discount can significantly reduce the effective tax rate payable on investment gains.

2. Trusts

Trusts may also qualify for the 50% CGT discount if eligibility requirements are satisfied.

Where gains are distributed to beneficiaries, the discounted capital gain may flow through to beneficiaries for tax purposes.

Trusts have specific tax and CGT rules that may affect how capital gains are distributed and taxed. Professional advice should be obtained before establishing or restructuring a trust.

3. Super Funds

Complying superannuation funds may receive a one-third CGT discount on eligible assets held for more than 12 months.

Because super funds are already taxed at concessional rates, the reduced CGT treatment can make superannuation a highly tax-effective long-term investment structure.

4. Companies

Companies are generally not eligible for the CGT discount.

Instead, capital gains are generally taxed at the applicable company tax rate.

This distinction can be important when choosing an investment structure.

Why the CGT Discount Exists

The CGT discount forms part of Australia's capital gains tax framework and has influenced investment decisions since its introduction.

The CGT discount was introduced as part of reforms to Australia's capital gains tax system. Prior to the discount, eligible taxpayers could use indexation methods to account for inflation on certain assets acquired before 21 September 1999. The discount method largely replaced indexation for assets acquired after that date.

The discount continues to influence investment decisions across property investing, share investing, retirement planning and small business ownership.

Capital Gains Tax Examples

1. Investment Property Example

Sarah purchased an investment property for $500,000.

Over several years she incurred:
 

• $20,000 in acquisition and legal costs 
• $30,000 in eligible capital improvement costs 

Her total cost base became $550,000.

She later sold the property for $700,000 and incurred $15,000 in selling costs.

Her adjusted cost base became $565,000.
 

• Capital proceeds: $700,000
• Cost base: $565,000
• Capital gain: $135,000

If the property was held for more than 12 months and all eligibility requirements are met, Sarah may be eligible for the 50% CGT discount.

Learn More About Capital Gains Tax on Property

Capital gains tax can be particularly complex when selling investment properties, former main residences, holiday homes or properties that have been used to produce income. Special rules may apply to the main residence exemption, temporary absences and partial exemptions.

For a detailed explanation, read our guide on property and house sales.

2. Share Investment Example

Michael purchased shares for $8,000 and later sold them for $14,000.

After brokerage costs, his capital gain was $5,500.

Because the shares were held for more than 12 months, he may only include 50% of the gain in his taxable income if eligible for the CGT discount.

3. Cryptocurrency Example

Emma purchased cryptocurrency for $3,000 and later exchanged it for another cryptocurrency worth $9,000.

Even though no Australian dollars were received, the exchange may still trigger a CGT event.

Her capital gain may be calculated using the market value of the cryptocurrency received at the time of the transaction.

Learn More About Cryptocurrency Tax

Cryptocurrency transactions can trigger CGT in a range of situations, including selling cryptocurrency, exchanging one cryptocurrency for another, gifting cryptocurrency and using cryptocurrency to purchase goods or services.

For a detailed explanation of cryptocurrency tax obligations and how to calculate crypto-related capital gains and losses, read our cryptocurrency tax guides:
 

• Australian Tax Guide to Cryptocurrency
• Tax Impact on Bitcoin and Cryptocurrency Investment
• How Do You Calculate Tax on Cryptocurrency?

Strategies to Reduce Capital Gains Tax Legally

Legitimate strategies that may help reduce CGT exposure include:

1. Holding Assets for More Than 12 Months

Holding eligible assets for more than 12 months may provide access to the CGT discount.

2. Offsetting Capital Losses

Capital losses from underperforming investments may be used to offset capital gains.
Unused losses may generally be carried forward indefinitely.

3. Using Superannuation Structures

Holding investments within superannuation may reduce long-term CGT exposure because of concessional tax treatment.

4. Timing Asset Sales Carefully

Investors may choose to dispose of assets when:
 

• taxable income is lower 
• capital losses are available 
• retirement reduces marginal tax rates 
• superannuation transition strategies are available 

Professional tax advice is particularly valuable where significant capital gains are involved.

Record Keeping Requirements for Capital Gains Tax

Good record keeping is essential. You should generally keep records relating to:
 

• purchase contracts 
• sale contracts 
• legal documents 
• invoices and receipts 
• brokerage statements 
• renovation and improvement costs 
• cryptocurrency transaction histories 

CGT records should generally be retained for at least five years after the relevant CGT event.

If you make a capital loss and carry it forward to future years, records should generally be retained until at least five years after the capital loss is applied against a capital gain.

Without proper records, you may:
 

• incorrectly calculate capital gains or losses 
• miss cost base adjustments 
• pay more tax than necessary 

Common Capital Gains Tax Mistakes

Common CGT mistakes include:
 

• forgetting to include capital gains in tax returns 
• misunderstanding the 12-month ownership rule 
• incorrectly calculating the cost base 
• failing to keep records of renovations and capital improvements 
• misunderstanding the main residence exemption 
• overlooking CGT implications when gifting assets 
• forgetting to apply carried-forward capital losses 
• assuming settlement date determines the CGT event timing 
• forgetting that cryptocurrency swaps may trigger CGT 
• ignoring cryptocurrency CGT obligations 
• failing to keep adequate records 

Poor record keeping is particularly common among long-term investors who may hold assets for many years before selling.

Proposed Capital Gains Tax Reforms Announced in the 2026 Federal Budget

The Australian Government announced proposed changes to capital gains tax and negative gearing arrangements as part of the 2026-27 Federal Budget.

Importantly, these measures are not yet law. The legislation has been introduced to Parliament, but has not yet passed.

For the 2025-26 income year, current CGT rules remain unchanged. This includes:

• the 50% CGT discount for eligible Australian resident individuals and trusts
• the one-third CGT discount for complying superannuation funds
• existing main residence exemption rules
• existing small business CGT concessions

Under the announced proposals, commencing 1 July 2027, for individuals and trusts, the 50% CGT discount will be replaced by an inflation-based indexation method alongside a 30% minimum tax rate on capital gains. Capital gains accrued before 1 July 2027 will still be eligible for the standard 50% CGT discount. Some exceptions will apply, for example:
 

• Investors in eligible new residential builds will be able to choose from the discount method and the new indexation method.
• The existing 60% CGT discount for qualifying affordable housing will be retained. To qualify for this, the property must be used to provide affordable housing  for a minimum of 3 years since 1 January 2018, and must be managed by a Community Housing Provider. When the property is sold, the Capital Gain can be reduced by the 50% discount plus an extra 10% for any period it was used to provide affordable housing.

Assets owned prior to 1 July 2027 and sold after 1 July 2027 will be treated under current arrangements on gains made prior to this date, and under the new arrangements for gains made after this date (with no impact until gains are realised). This will require a valuation of assets on 1 July 2027.

A minimum tax rate of 30 per cent will apply to real capital gains accruing from 1 July 2027 (with no impact until the income is realised). This will not affect people whose capital gains are already taxed at rates of at least 30 per cent. Recipients of means-tested income support payments, such as the Age Pension or JobSeeker, will be exempted from the minimum tax if they receive any payment in the financial year in which they realise the capital gain.

As these measures have not been legislated, taxpayers should continue applying current CGT rules unless and until the law changes.

For a detailed explanation of the announced reforms and their potential implications for investors, read our guide:

The Future of Australia’s CGT Discount: What It Means for Investment Property Owners

How H&R Block Can Help

Capital Gains Tax can become complex, particularly when dealing with:
 

• investment properties 
• shares and managed funds 
• cryptocurrency transactions 
• inherited assets 
• business asset sales 

At H&R Block, our Tax Experts can help:
 

• calculate capital gains and capital losses 
• determine the correct cost base 
• apply eligible exemptions and discounts 
• review historical transactions 
• identify relevant CGT events 
• ensure your tax return is lodged accurately 

With over 50 years of Australian tax expertise and more than 400 offices nationwide, H&R Block can help you better understand your CGT obligations and avoid costly mistakes.

Call 13 23 25 or book an appointment with your nearest H&R Block office today.