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Capital Gains Tax (CGT) Australia Guide (2026–27): Property, Shares & 50% Discount

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Capital Gains Tax (CGT) Australia Guide (2026–27)

When you sell or dispose of a capital asset in Australia—such as residential real estate, ASX shares, cryptocurrency, or commercial investments—any profit made over the asset's original cost base is subject to Capital Gains Tax (CGT).

In Australia, CGT is not a separate, standalone tax; rather, your net capital gain is added directly to your assessable income in the financial year the contract for sale is signed, and taxed at your marginal personal income tax rate.

This comprehensive guide covers how to calculate your CGT cost base, how the 50% CGT discount works, the Main Residence Exemption (including the 6-year rule), and strategies to legally minimize your capital gains tax liability.

1. How Capital Gains Tax Works in Australia

A CGT Event occurs when you sell, gift, exchange, or lose ownership of a capital asset.

The Basic CGT Formula

Gross Capital Gain=Capital Proceeds (Sale Price)−Cost Base of Asset\text{Gross Capital Gain} = \text{Capital Proceeds (Sale Price)} - \text{Cost Base of Asset}

What Is Included in the Cost Base?

Your cost base includes more than just the purchase price—it incorporates 5 distinct elements:

  1. Acquisition Money: The purchase price paid for the asset.
  2. Incidental Acquisition Costs: Stamp duty, legal conveyancing fees, buyer's agent fees, advertising costs.
  3. Holding Costs (for assets where not claimed as tax deductions): Council rates, insurance, and land tax incurred during periods the asset was not generating rental income.
  4. Capital Improvements: Major renovations, structural extensions, landscaping, or new additions that enhance asset value.
  5. Title & Disposal Costs: Real estate agent selling commissions, auctioneer fees, legal disposal conveyancing.

2. The 50% CGT Discount for Individuals

If you are an Australian tax resident (or trust) and hold an asset for at least 12 continuous months before the date the contract of sale is signed, you are entitled to a 50% CGT Discount.

The 50% Discount Calculation

Under the discount method, you only pay income tax on half of the net capital gain:

Taxable Net Capital Gain=Gross Capital Gain×50%\text{Taxable Net Capital Gain} = \text{Gross Capital Gain} \times 50\%

Case Study: Selling an Investment Property

Sophie purchased an investment apartment in Melbourne for $500,000 (total cost base = $540,000 including stamp duty/renovations). After holding the property for 4 years, she sells it for $780,000 (selling costs = $20,000; net proceeds = $760,000):

  1. Gross Capital Gain: $760,000 - $540,000 = $220,000.
  2. Apply 50% CGT Discount: $220,000 \times 50% = $110,000.
  3. Tax Treatment: Sophie adds $110,000 to her taxable income in that tax year. If her marginal tax rate is 37% + 2% Medicare = 39%, total tax payable on the sale is $42,900 — an effective tax rate of just 19.5% on her $220,000 profit!

Note: Australian Companies (Pty Ltd) are not eligible for the 50% CGT discount and pay full company tax (25% or 30%) on 100% of capital gains.

3. The Main Residence Exemption & The 6-Year Rule

Your primary home (principal place of residence / PPR) is generally 100% exempt from Capital Gains Tax upon sale, provided you lived in the home, kept your personal belongings there, and did not use it to produce assessable rental income.

The Famous "6-Year Rule" (Absence Rule)

If you move out of your primary home and rent it out to tenants (e.g. relocating for work), the ATO allows you to treat that property as your main residence for up to 6 continuous years:

  • If you sell the property within 6 years of renting it out, the entire capital gain remains 100% tax-free (provided you do not nominate another home as your primary residence during that same period).
  • If you move back in before the 6 years expire and then move out again, the 6-year clock resets!

4. Offsetting Capital Losses

If you sell an asset at a loss, you generate a Capital Loss:

  • Capital losses can be offset against capital gains made in the same financial year.
  • If your capital losses exceed your capital gains, the net loss cannot be deducted against salary/wages, but rolls forward indefinitely to offset future capital gains in subsequent tax years.

5. Calculate Your CGT Liability

Model capital gains on real estate, ASX shares, or crypto using our free Australian tax tools:

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