The 50% CGT discount: who gets it, the 12-month rule and how gains are taxed
How capital gains tax works for Australian individuals: the 50% discount after 12 months, cost base, losses applied first, exemptions and the rules for foreign residents.
Australia has no separate capital gains tax rate. A net capital gain is added to your taxable income and taxed at your marginal rates. If you are an Australian resident individual (or a trust beneficiary) and you held the asset for at least 12 months, you can usually reduce the gain by the 50% CGT discount before adding it. Complying super funds get a one-third discount; companies get none. Any capital losses must be applied before the discount, and losses can only be offset against capital gains, not against salary.
This guide explains the core rules for shares, ETFs, crypto and investment property held by individuals. For a full calculation with a sale of shares, see the worked example. The rules described apply to CGT events up to 30 June 2027. Parliament has already legislated a major change for later sales (Treasury Laws Amendment (Tax Reform No. 1) Act 2026), summarised below; check the ATO for the detail that applies to the year of your sale.
The basic calculation
- Capital proceeds: what you received (or market value in some cases, such as gifts).
- Cost base: what the asset cost you, plus certain costs (below).
- Capital gain = proceeds − cost base (or a capital loss if the reduced cost base exceeds proceeds).
- Add up all capital gains for the year, subtract current-year capital losses, then prior-year net capital losses.
- Apply the 50% discount to any remaining discountable gains.
- The result is your net capital gain, added to taxable income.
The CGT event usually happens on the contract date, not settlement. A property contract signed on 25 June 2026 that settles on 20 July 2026 is a 2025–26 event.
The cost base
The cost base can include five elements:
| Element | Examples |
|---|---|
| Money paid to acquire the asset | Purchase price of shares, property or crypto |
| Incidental costs | Brokerage, stamp duty, legal fees, agent's commission on sale, valuation fees |
| Costs of owning (non-deductible) | For property bought after 20 August 1991: interest, rates and insurance only if never deductible, e.g. on vacant land in some cases |
| Costs to increase or preserve value | Capital improvements not already claimed as capital works deductions |
| Costs to defend title | Legal costs to protect your ownership |
For a rental property, capital works deductions (the 2.5% building allowance) you have claimed reduce the cost base, which increases the gain on sale. Keep records of every cost for at least five years after the asset is sold.
The 12-month rule
To qualify for the discount, you must have owned the asset for at least 12 months, not counting the day you acquired it and the day of the CGT event. Buying on 10 March 2025 and signing a sale contract on 10 March 2026 is not enough; 11 March 2026 is.
Illustrative comparison, marginal rate 32% (2026–27, including Medicare levy), gain of $10,000:
| Held | Taxable gain | Tax at 32% |
|---|---|---|
| 11 months | $10,000 | $3,200 |
| 12 months and one day | $5,000 | $1,600 |
Waiting a few weeks can halve the tax. The trade-off is market risk during that time, which may be larger than the tax saved.
Who does not get the discount
- Companies get no discount.
- Foreign residents and temporary residents: for gains accruing after 8 May 2012 the discount is generally not available. If you were a resident for part of the ownership period, an apportioned discount may apply.
- Assets held under 12 months.
- Some trust distributions and certain revenue assets: if you are trading shares as a business, profits are ordinary income and the CGT discount does not apply.
Changes from 1 July 2027
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (assented 26 June 2026) changes how individuals and trusts are taxed on gains from CGT events on or after 1 July 2027:
- The 50% discount ends for most assets. For individuals and trusts, the 50% discount applies only to CGT events before 1 July 2027. After that date the discount is generally 0%, except for gains on a qualifying new residential dwelling and on affordable housing, which keep a 50% discount.
- Indexation returns. For Australian resident individuals (and trusts, to the extent of resident individual beneficiaries), the cost base of an asset held for at least 12 months can be indexed for inflation for the period from 1 July 2027. Foreign and temporary residents do not get this indexation.
- Assets you already own are protected for the past. If you hold an asset at the end of 30 June 2027, you are treated as selling it at market value just before 1 July 2027 and buying it back. The gain to that date is deferred until you actually sell and can still get the 50% discount if the 12-month rule is met; you can choose an apportioning method instead of a valuation. Only the post-July 2027 part is taxed under the new rules.
- A 30% minimum tax on capital gains. Resident individuals may pay extra tax so that most net capital gains from CGT events on or after 1 July 2027 bear at least 30% before offsets. People who receive certain payments in the year, such as the age pension, JobSeeker, Youth Allowance, family tax benefit or parental leave pay, are excluded.
Gains from CGT events up to 30 June 2027 are taxed under the existing rules described in this guide. The new rules interact with negative gearing changes for established residential property from 2027–28; see the negative gearing example. Because the transitional rules are detailed, get advice from a registered tax agent before timing a large sale around 1 July 2027.
Common exemptions
| Asset or situation | Treatment |
|---|---|
| Your main residence | Generally exempt, with partial exemptions if rented or used to produce income; the absence rule can preserve the exemption for up to six years if it is rented out |
| Assets acquired before 20 September 1985 | Exempt from CGT |
| Cars and motorcycles designed to carry less than one tonne | Exempt |
| Personal use assets costing $10,000 or less | Exempt |
| Collectables costing $500 or less | Exempt |
| Super fund balances | Taxed inside the fund, not to you |
Foreign residents have generally been unable to claim the main residence exemption on a home sold after 9 May 2017, subject to limited life-event exceptions.
Capital losses
- Losses reduce gains before the discount. Applying a $4,000 loss to a $10,000 discountable gain leaves $6,000, discounted to $3,000.
- If you also have a non-discountable gain (held under 12 months), apply losses to that gain first; it usually produces a better result.
- Unused net capital losses carry forward indefinitely.
- Selling an asset and buying it back soon after mainly to create a loss can be treated by the ATO as a wash sale, and the loss may be denied.
Crypto
The ATO treats crypto assets as CGT assets for most individuals. Swapping one coin for another is a CGT event, not just converting to dollars. The ATO receives data from Australian exchanges, so record every trade, its date and its value in Australian dollars.
FAQ
Is the CGT discount 50% of the tax or of the gain?
Of the gain. Half the discountable gain is added to taxable income, which is then taxed at your marginal rates.
Can a capital loss reduce my salary income?
No. Net capital losses can only be used against capital gains.
Does a large gain change my bracket?
It can. The net gain is added to taxable income, so part of it may fall into a higher bracket and can also affect the Medicare levy surcharge, HELP repayment and Division 293.
Do I pay CGT when I inherit an asset?
Generally not at the time of inheritance; CGT usually applies when you later sell. Special rules apply to the cost base and to inherited dwellings.
Sources
- Australian Taxation Office — capital gains tax, CGT discount, cost base, main residence exemption, crypto
- Federal Register of Legislation — Income Tax Assessment Act 1997, Parts 3-1 and 3-3 (Division 115 for the discount); Treasury Laws Amendment (Tax Reform No. 1) Act 2026 for the changes from 1 July 2027
- Moneysmart — general guidance on investing and tax
Related: income tax rates, negative gearing example, Division 293.
