Capital Gains Tax Australia: How CGT Works (2025-26)

Capital gains tax, or CGT, is not a separate tax in Australia. Instead, it is part of your income tax and applies when you make a capital gain on an asset you acquired on or after 20 September 1985. In simple terms, if you sell, dispose of, gift, swap or otherwise stop owning an asset for more than its cost base, the profit may be included in your tax return. CGT can apply to shares, investment property, units in trusts, crypto assets, collectibles and other CGT assets. It can also apply to business assets, although small business concessions may reduce or eliminate the tax in some cases. The key point is that CGT is based on the capital proceeds you receive, not just the cash in your bank account, and the timing of the CGT event matters just as much as the sale price.

For many individuals, the most important rule is the 50% CGT discount. If you are an Australian resident individual or trust and you have owned the asset for at least 12 months before the CGT event, you may generally reduce the capital gain by 50% before it is taxed. Superannuation funds can usually claim a one-third discount rather than 50%, while companies do not get a CGT discount. The discount applies after you have worked out your net capital gain for the asset and after any capital losses have been used. Capital losses do not reduce your taxable income directly; instead, they are first offset against capital gains, and any leftover losses are carried forward to future years. This order matters, because you generally want to use losses against gains before applying the discount.

Your cost base is central to calculating CGT. It is usually more than just the price you paid. The cost base can include purchase price, legal fees, stamp duty, agent’s fees on acquisition and sale, borrowing costs that are not otherwise deductible, and certain capital improvements or ownership costs depending on the asset and rules that apply. For shares, the cost base often includes brokerage and buying costs. For crypto, the ATO treats each disposal separately, and you need records of the AUD value at the time of each purchase, swap, sale or use of the asset. For investment property, you may need to separate deductible expenses, such as interest or repairs, from non-deductible capital costs. A correct cost base can make a significant difference to the gain you declare, so recordkeeping is crucial from day one.

The main residence exemption is one of the most valuable CGT concessions for individuals. In many cases, if the property was your home for the whole period you owned it and was not used to produce assessable income, any capital gain or loss is disregarded. However, the rules are not always straightforward. If you rented out part of the home, used it to earn income, or moved out and claimed the six-year absence rule, only part of the gain may be exempt. If you owned more than one property, the ATO will look at where you actually lived, not simply what you called your home. If you inherited a property or received it through a relationship breakdown, special CGT rules may also apply. Careful planning is especially important where a home has been used partly for business or rental purposes.

CGT also applies to shares and crypto, which are common problem areas for taxpayers because records can be incomplete or transactions frequent. Shares may trigger CGT when you sell, gift or transfer them, including in some off-market transfers. Dividends are not CGT events, but capital gains and losses from sales must still be reported. With crypto, the ATO treats exchanging one token for another as a CGT event in many cases, not just converting back to Australian dollars. Using crypto to buy goods or services can also trigger CGT. If you have multiple wallets or exchanges, you still need to track your transactions consistently and calculate the gain or loss in AUD each time. The ATO continues to focus on data matching in this area, so good records are essential.

Looking ahead, there has been discussion about proposed CGT reforms from 2027, but as at 2025-26 you should only rely on law that has actually been enacted. Tax rules can change, and any future reform may affect certain asset classes, discounts or exemption settings, but taxpayers should not assume a proposal will necessarily become law in the same form or timeframe. For now, the existing CGT framework still applies, including the 50% discount, the main residence exemption and the current treatment of capital losses. If you have sold assets, are considering a property sale, or hold shares or crypto with incomplete records, the best approach is to work through the CGT event before you lodge. Contact SolAeon Tax for tailored advice on your CGT position and to make sure your return is prepared correctly.