Capital Gains Tax Australia 2025: Complete CGT Guide
IntuitiveCalc Team
Financial Content Specialist
Capital Gains Tax (CGT) applies when you sell assets like property, shares, or cryptocurrency for a profit. Understanding CGT rules can save you thousands of dollars and help you make smarter investment decisions. This comprehensive guide covers everything from the 50% CGT discount to exemptions and calculation methods.
What is Capital Gains Tax?
CGT isn't a separate tax - it's part of your income tax. When you sell a CGT asset for more than you paid, the profit (capital gain) is added to your taxable income and taxed at your marginal rate.
- CGT Events: Selling, gifting, losing, or destroying an asset
- Cost Base: What you paid, plus associated costs
- Capital Proceeds: What you received from the CGT event
- Capital Gain: Proceeds minus cost base
The 50% CGT Discount
Australian residents who hold a CGT asset for more than 12 months are entitled to a 50% CGT discount. This is one of the most valuable tax concessions available to investors.
CGT Discount Example
| Scenario | Held <12 months | Held >12 months |
|---|---|---|
| Purchase price | $50,000 | $50,000 |
| Sale price | $80,000 | $80,000 |
| Capital gain | $30,000 | $30,000 |
| 50% discount | Not applicable | -$15,000 |
| Taxable gain | $30,000 | $15,000 |
| Tax @ 32.5% marginal rate | $9,750 | $4,875 |
Savings from 50% discount: $4,875
Who Qualifies for the 50% Discount?
- Australian residents: Full 50% discount
- Temporary residents: 50% discount on assets acquired during residency
- Foreign residents: Generally NO discount (some exceptions apply)
- Companies: NO discount (but may use indexation method for pre-1999 assets)
- Super funds: 33.33% discount (not 50%)
CGT on Property
Property is subject to CGT rules, but several exemptions and concessions can significantly reduce or eliminate your tax liability.
Main Residence Exemption
Your home (principal place of residence) is generally CGT-free when sold. This is one of the most valuable tax exemptions in Australia.
Main Residence Exemption Requirements
- You and your family lived in the dwelling as your main residence
- The land is 2 hectares or less
- The dwelling wasn't used to produce income (with some exceptions)
- You didn't use it for business
- You're an Australian resident (or your spouse was)
6-Year Absence Rule
If you move out of your home (but don't buy another one), you can treat it as your main residence for up to 6 years, even if you rent it out. This rule can be used multiple times.
6-Year Rule Example
Sarah lived in her home for 5 years, then rented it out for 4 years while working overseas. She then sold it:
- Total ownership: 9 years
- Absence period: 4 years (within 6-year limit)
- Result: Full main residence exemption applies
Investment Property CGT
Investment properties don't qualify for the main residence exemption, but you can still minimise CGT:
Investment Property CGT Calculation
| Sale price | $750,000 |
| Purchase price | -$500,000 |
| Stamp duty | -$20,000 |
| Legal fees (purchase + sale) | -$3,000 |
| Agent commission on sale | -$15,000 |
| Capital improvements (new bathroom, kitchen) | -$30,000 |
| Capital Gain | $182,000 |
| 50% CGT discount (held >12 months) | -$91,000 |
| Taxable Capital Gain | $91,000 |
CGT on Shares
When you sell shares for a profit, you'll pay CGT on the gain. The 50% discount applies if you held the shares for more than 12 months.
Cost Base for Shares
Your cost base includes:
- Purchase price of shares
- Brokerage fees (buying and selling)
- Dividend Reinvestment Plan (DRP) shares at their market value
- Capital returns that reduced cost base
Record Keeping for Shares
Keep detailed records including:
- Contract notes for all buy and sell transactions
- DRP statements showing shares allocated
- Corporate action notices (stock splits, mergers, demergers)
- Records of any capital returns received
Keep records for 5 years after the CGT event.
FIFO vs Specific Identification
When selling part of your shareholding, you can choose which parcels to sell:
- Specific Identification: Choose which parcel to sell (usually the highest cost base)
- FIFO (First In, First Out): Default method if you don't specify
Tax-Loss Harvesting Strategy
You can offset capital gains with capital losses. If you have shares trading at a loss:
- Sell the losing shares before 30 June to crystallise the loss
- Use the loss to offset gains from other investments
- Carry forward unused losses to future years
- Warning: The "wash sale" rule prevents buying back identical assets immediately
CGT on Cryptocurrency
The ATO treats cryptocurrency as property, not currency. This means CGT applies to virtually all crypto transactions.
CGT Events for Crypto
The following are taxable CGT events:
- Selling crypto for AUD (or any fiat currency)
- Trading one crypto for another (e.g., BTC to ETH)
- Using crypto to buy goods or services
- Gifting cryptocurrency
- Converting crypto to stablecoins
Personal Use Asset Exception
Crypto may be exempt from CGT if:
- It's used to purchase goods/services for personal use
- Cost base is $10,000 or less
- You acquired it with the intention of personal use
ATO Crypto Data Matching:
The ATO has data matching programs with all major Australian crypto exchanges. They receive records of your transactions, so ensure your tax return matches exchange records.
Crypto CGT Calculation Example
Multiple Crypto Transactions
James made these transactions:
| Date | Transaction | Amount |
|---|---|---|
| Jan 2023 | Bought 1 BTC | $30,000 |
| Mar 2024 | Sold 1 BTC | $65,000 |
- Capital gain: $65,000 - $30,000 = $35,000
- Held >12 months: 50% discount applies
- Taxable gain: $17,500
CGT Exemptions and Concessions
CGT-Free Assets
The following are generally exempt from CGT:
- Your main residence (principal place of residence)
- Cars and motorcycles
- Personal use assets acquired for $10,000 or less
- Depreciating assets used solely for taxable purposes
- Decorations for valour or bravery
- Assets acquired before 20 September 1985 (pre-CGT)
- Life insurance policies
- Gambling and lottery winnings
Small Business CGT Concessions
Small businesses with aggregated turnover under $2 million (or net assets under $6 million) may access additional CGT concessions:
Small Business CGT Concessions
- 15-Year Exemption: Full CGT exemption if you've owned the asset for 15+ years and are 55+ retiring
- 50% Active Asset Reduction: Additional 50% reduction on top of the general 50% discount
- Retirement Exemption: Up to $500,000 lifetime CGT exemption
- Rollover Relief: Defer CGT on replacement business assets
Timing Strategies to Minimise CGT
1. Hold for 12 Months
The 50% CGT discount is significant. If possible, delay selling until you've held the asset for at least 12 months and 1 day.
2. Time Your Sales
Consider selling in a year when your other income is lower. Since CGT is added to your income and taxed at your marginal rate, lower income years result in lower CGT.
3. Offset Gains with Losses
Capital losses must be offset against capital gains before applying the 50% discount. Consider crystallising losses before 30 June.
Loss Offset Order
- 1. Apply current year capital losses to current year gains
- 2. Apply prior year capital losses (carried forward)
- 3. Apply the 50% discount to remaining gains (if held >12 months)
- 4. Add to your taxable income
4. Contribute to Super
Making concessional super contributions reduces your taxable income, potentially pushing you into a lower tax bracket for your capital gain.
Reporting CGT
Capital gains are reported in your tax return at Question 18 of the Individual tax return. You'll need to provide:
- Total current year capital gains
- Net capital gain (after losses and discounts)
- Details of each CGT event (may be required in a schedule)
CGT Schedule Required If:
- Total capital gains are $10,000 or more
- You're claiming the small business CGT concessions
- You have capital gains from trusts or managed funds
- The ATO specifically requests it
Common Questions
Do I pay CGT on inherited assets?
When you inherit an asset, there's no CGT at that time. However, when you later sell it, CGT applies based on when the deceased acquired it. If they acquired it before 20 September 1985, your cost base is the market value at their death.
What if I give away an asset?
Gifting an asset triggers a CGT event. You're treated as receiving the market value of the asset, even though you received nothing.
Can I defer CGT?
Various rollover provisions allow deferring CGT, including:
- Marriage breakdown rollovers
- Small business restructure rollovers
- Scrip-for-scrip rollovers (takeovers and mergers)
- CGT event happening involuntarily (compulsory acquisition)
Key Takeaways
- CGT is not a separate tax - gains are added to your income and taxed at your marginal rate
- The 50% CGT discount applies if you hold assets for more than 12 months
- Your main residence is generally CGT-free (main residence exemption)
- Cryptocurrency is subject to CGT on virtually all transactions
- Capital losses can only offset capital gains (not other income)
- Keep detailed records for at least 5 years after the CGT event
- Consider timing strategies and loss harvesting to minimise CGT