Capital Gains Tax (CGT) Australia: Complete Guide with Examples
Everything you need to know about Capital Gains Tax in Australia. When CGT applies, how the 50% discount works, the main residence exemption, and strategies to legally minimise your CGT bill.
What triggers a capital gains tax event?
A CGT event occurs when you dispose of a CGT asset. The most common CGT events are selling shares, crypto, or investment property, but CGT also applies when you gift an asset, transfer it to another entity, lose or destroy an asset (insurance payouts), redeem managed fund units, or when a company or trust distributes a capital gain to you. Your main residence is generally exempt from CGT (covered below), but virtually every other asset you own is a CGT asset — including collectibles worth more than $500, vacant land, business assets, foreign property, and cryptocurrency. Personal use assets (items you bought for personal enjoyment) are exempt if they cost $10,000 or less. CGT does not apply to assets you acquired before 20 September 1985 (pre-CGT assets), depreciating assets used solely for taxable purposes, or trading stock. The capital gain or loss is the difference between the capital proceeds (what you receive) and the cost base (what you paid, including incidental costs).
The 50% CGT discount: hold for 12 months
Australian individuals and trusts that hold a CGT asset for at least 12 months before disposal are entitled to a 50% discount on the capital gain. This means only half the gain is added to your taxable income. For example, if you buy shares for $20,000 and sell them 14 months later for $35,000, your capital gain is $15,000. After the 50% discount, only $7,500 is added to your taxable income. At a 30% marginal tax rate (plus 2% Medicare levy), you would pay $2,400 in CGT instead of $4,800 without the discount. The 12-month period is counted from the date of acquisition to the date of the CGT event — for shares, this is typically the trade date (not settlement date). The discount is not available to companies. For superannuation funds, a one-third discount (33.33%) applies instead of 50%. The 50% discount applies after you have offset any capital losses against your capital gains for the year. This sequencing matters — you reduce the gain first, then apply the discount to the net amount.
Main residence exemption: your home is (usually) CGT-free
Your main residence — the home you live in — is generally fully exempt from CGT when you sell it. To qualify for the full exemption, the property must have been your main residence for the entire period you owned it, the land must be two hectares or less, and you must not have used it to produce income (such as renting out a room on Airbnb or running a home business from a dedicated area). If you move out of your main residence and rent it out, the absence rule allows you to continue treating it as your main residence for CGT purposes for up to six years, provided you do not claim another property as your main residence during that time. This six-year rule resets each time you move back in and establish it as your main residence again. If you used part of your home to produce income — such as renting out a room — you receive a partial exemption based on the floor area used for income production. If you lived in the property for only part of the ownership period, a partial exemption applies based on the number of days it was your main residence.
CGT on shares and cryptocurrency
Shares and cryptocurrency are both CGT assets in Australia. When you sell, trade, gift, or otherwise dispose of shares or crypto, you must calculate the capital gain or loss. For shares, your cost base includes the purchase price plus brokerage fees on both the buy and sell sides. Dividend reinvestment plan (DRP) shares have a cost base equal to the DRP price at which they were allocated. For cryptocurrency, every disposal event triggers CGT — this includes selling crypto for AUD, trading one crypto for another (such as swapping Bitcoin for Ethereum), using crypto to purchase goods or services, and gifting crypto. Each transaction requires you to calculate the gain or loss based on the cost base of the specific coins disposed of. The ATO accepts the FIFO (first in, first out), LIFO (last in, first out), or specific identification methods for matching parcels. If you trade frequently, the record-keeping burden can be significant — crypto tax software like Koinly or CryptoTaxCalculator can automate the tracking. Capital losses on shares or crypto can only be offset against capital gains, not against ordinary income.
Understanding cost base calculations
Your cost base is the total of five elements: the acquisition cost (purchase price), incidental costs of acquisition and disposal (brokerage, legal fees, stamp duty, valuation fees), costs of owning the asset that are not otherwise deductible (such as interest on a loan to buy shares, if not claimed as an income deduction), capital expenditure to increase or preserve the asset's value (renovations on an investment property, for example), and capital expenditure to establish, preserve, or defend your title or rights to the asset (legal costs in a boundary dispute). For inherited assets, the cost base depends on when the deceased acquired the property. If they bought it before 20 September 1985, your cost base is the market value on the date of death. If they bought it after that date, you inherit their cost base and their acquisition date. For gifted assets, your cost base is typically the market value at the time of the gift. Keeping detailed records of all cost base elements is essential — without records, you may be forced to use a zero cost base, resulting in the maximum possible capital gain.
Strategies to minimise capital gains tax
Several legitimate strategies can reduce your CGT liability. First, always hold assets for at least 12 months to access the 50% discount — selling at 11 months and 29 days means you pay tax on the full gain. Second, time your disposals: if you expect lower income next year (due to taking leave, reducing hours, or retiring), deferring the sale to the lower-income year means the gain is taxed at a lower marginal rate. Third, use capital losses strategically — harvest losses on underperforming investments in the same financial year as a gain to offset the tax. Fourth, make concessional super contributions to reduce your taxable income in the year you realise a gain, pushing it into a lower tax bracket. Fifth, for investment properties, maximise your cost base by keeping records of all capital improvements — a $40,000 kitchen renovation increases your cost base and reduces your eventual gain. Sixth, consider the small business CGT concessions if you are selling active business assets — the lifetime $500,000 small business CGT cap, the 50% active asset reduction, and the retirement and rollover concessions can eliminate or defer significant gains. Use our Tax Calculator to model the impact of different timing and offset strategies.
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General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.
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