Tax & ATO
Capital Gains Tax
Capital Gains Tax (CGT) is the tax on profit from selling or disposing of an asset such as shares, an investment property or business goodwill. It is not a separate tax: the net capital gain is added to your assessable income and taxed at your marginal rate, with a 50% discount for individuals holding assets over 12 months.
A CGT event happens when you dispose of a CGT asset: selling it, gifting it, or having it destroyed or compulsorily acquired. The capital gain is the capital proceeds minus the cost base (purchase price plus incidental costs like stamp duty, legal fees and agent commissions, plus capital improvements). The gain is assessed in the year the contract is signed, not the year of settlement, which regularly catches property sellers whose contract and settlement straddle 30 June.
Individuals and trusts that have held the asset at least 12 months apply the 50% CGT discount and pay tax on only half the gain; complying super funds get a one-third discount; companies get none. Capital losses offset capital gains (before the discount is applied) and unused losses carry forward indefinitely, but they can never offset ordinary income like wages. Your main residence is generally exempt, and pre-20-September-1985 assets sit outside the regime entirely. The ATO capital gains tax guide covers the event types and cost base rules in detail.
Beyond the general 50% discount, small businesses have four further concessions that can reduce the tax on selling a business or business asset to zero. Eligibility requires aggregated turnover under $2 million or net CGT assets of no more than $6 million, and the asset must be an active asset used in the business. The four concessions: the 15-year exemption (fully tax-free if you owned the asset 15+ years and are 55 or over and retiring, or permanently incapacitated); the 50% active asset reduction (a further halving on top of the general discount); the retirement exemption (up to a $500,000 lifetime cap tax-free, paid into super if you are under 55); and the small business rollover (defer the gain by buying a replacement active asset within two years).
The concessions stack. A sole trader selling business goodwill for a $400,000 gain after 15 years in business could pay no CGT at all under the 15-year exemption. Even without it, the general discount plus the active asset reduction cuts the assessable gain to 25% of the raw figure before the retirement exemption applies. The rules are strict on timing and structure, so get advice before signing a sale contract, not after; the ATO small business CGT concessions overview sets out the basic conditions.
You bought shares for $20,000 in March 2024, paying $50 brokerage, and sold them in May 2026 for $50,000 with $100 brokerage. Cost base: $20,150. Capital proceeds less selling costs: $49,900. Capital gain: $29,750. You held the shares more than 12 months, so the 50% discount applies and $14,875 is added to your 2025-26 assessable income. If your marginal rate is 30% plus the 2% Medicare levy, the CGT bill is about $4,760, an effective 16% on the raw gain.
Run the same numbers the other way and the asymmetry of losses shows up: had the shares fallen to $10,000, the roughly $10,150 capital loss could only offset other capital gains, this year or in the future, not your salary. Timing matters too: deferring a sale contract from late June into early July pushes the tax a full year later, while bringing forward a sale to a low-income year (parental leave, a gap between contracts) can drop the gain into lower brackets. Model a disposal with the OneBookPlus capital gains tax calculator before you sell.
The definitions above only get you so far; the free OneBookPlus capital gains tax calculator turns them into your own figures in seconds, no sign-up needed.
Usually no. Your main residence is exempt if you lived in it throughout ownership and it was not used to produce income. Renting part of it out, running a business from it, or holding it on more than two hectares can create a partial liability. If you move out and rent it, the six-year absence rule can preserve the full exemption provided you do not treat another property as your main residence.
No. The net capital gain simply joins your other assessable income on your tax return and is taxed at your marginal rate. That is why a large one-off gain can push you into a higher bracket, trigger Division 293 tax on super contributions, or raise a HELP repayment: it inflates your income for that single year.
It does not: companies are excluded from the general CGT discount and pay tax on the whole gain at the company rate (25% for base rate entities). This is a real factor when choosing a structure, because a trust or individual selling the same asset after 12 months pays tax on only half the gain. The small business CGT concessions can still apply to companies that meet the conditions.
Last reviewed and updated: by Bishal Shrestha