Capital Gains Tax Australia 2025-26: The 50% CGT Discount Explained
When you sell an asset for more than you paid, the profit is a capital gain and it's added to your taxable income. But Australia's 50% CGT discount — one of the most generous in the developed world — can halve your tax bill if you've held the asset for more than 12 months. Here's exactly how to calculate what you owe.
What Is Capital Gains Tax in Australia?
Australia does not have a separate CGT rate. Capital gains are added to your assessable income for the year and taxed at your marginal income tax rate. The CGT discount is a reduction applied to the capital gain before it is added to income — not a separate tax rate. CGT applies to most assets acquired after 20 September 1985 (pre-CGT assets are exempt).
The 50% CGT Discount: Who Qualifies?
Australian residents who have owned a CGT asset for more than 12 months are entitled to a 50% discount on capital gains. This means only half the gain is added to taxable income. Key conditions:
- The asset must be owned by an individual or trust. Companies do not receive the discount.
- The asset must have been held for at least 12 months and 1 day from acquisition to sale.
- The discount reduces the nominal gain — not the tax owed.
How to Calculate Your CGT: Step by Step
- Calculate the gross gain: Sale price − cost base (purchase price + incidental costs).
- Apply the 50% discount if held over 12 months: Discounted gain = gross gain × 50%.
- Add to taxable income: Your total income for the year = regular income + discounted gain.
- Apply your marginal rate to the total income to find total tax owed.
- CGT payable = Total tax − tax that would have been payable on income without the gain.
Worked Example: Shares Sold After 2 Years
| Item | Amount |
|---|---|
| Purchase price (1,000 shares at $12) | $12,000 |
| Sale price (1,000 shares at $20) | $20,000 |
| Gross capital gain | $8,000 |
| 50% CGT discount (held 24 months) | −$4,000 |
| Discounted gain added to income | $4,000 |
| Other income | $80,000 |
| Total taxable income | $84,000 |
| Marginal rate on gain portion (32.5%) | $1,300 |
Without the 50% discount, the same investor would owe $2,600 on an $8,000 gain. The discount saves $1,300 — a direct tax reduction of 50%.
Main Residence Exemption
Your home is fully exempt from CGT if it was your main residence for the entire ownership period, was not used to produce income (i.e., no rental), and the land is under 2 hectares. If you rented out part of your home or moved out before selling, a partial exemption applies based on the proportion of time it was your main residence.
Investment Property and the 6-Year Rule
If you move out of your main residence and rent it out, you can continue to treat it as your main residence for up to 6 years — provided you do not claim another property as your main residence in that period. This is the six-year absence rule under s118-145 ITAA 1997 and can eliminate CGT on properties that appreciate significantly while rented.
Capital Losses and How to Use Them
Capital losses can only offset capital gains — they cannot reduce other income. If your losses exceed your gains in a year, the excess carries forward indefinitely to offset future gains. There is no time limit on carrying forward capital losses in Australia.
Use the Australian CGT Calculator to calculate your exact CGT liability, including the 50% discount and effective tax rate.
Frequently Asked Questions
- Do I pay CGT on cryptocurrency gains?
- Yes. The ATO treats cryptocurrency as a CGT asset. Each disposal (sale, trade, or conversion to another currency) is a CGT event. The 50% discount applies if held more than 12 months.
- Does the CGT discount apply to foreign residents?
- No. Foreign residents are not entitled to the 50% CGT discount for taxable Australian property gains — they are taxed on the full nominal gain at Australian marginal rates.
- Is the cost base just the purchase price?
- No. The cost base includes the purchase price plus incidental costs: stamp duty, legal fees, broker commissions, and any capital improvements. A higher cost base reduces your gain and therefore your CGT.