• 26 September, 2025

How Capital Gains Tax Works in Australia

Thinking about selling your investment property, shares, or cryptocurrency? Before you celebrate your profits, there’s one important factor to consider—Capital Gains Tax (CGT).

In Australia, CGT isn’t a separate tax. Instead, it forms part of your income tax, meaning any capital gain you make is added to your taxable income for the year. Understanding how CGT works can help you reduce your tax bill, plan smarter investments, and keep more of your profits.

What is Capital Gains Tax (CGT)?

Capital Gains Tax was introduced in Australia in 1985 and applies when you make a profit from selling an asset.

👉 Simple Example:

• Buy shares for $10,000
• Sell them for $15,000
• Capital gain = $5,000
• You only pay tax on the $5,000 profit, not the full amount

When Does CGT Apply?

CGT applies when a “CGT event” occurs—usually when you dispose of an asset.

Common CGT Assets

• Shares and managed funds
• Investment properties (excluding your main residence)
• Cryptocurrency (Bitcoin, Ethereum, etc.)
• Business assets
• Collectibles over $500 (art, antiques, etc.)

CGT Events

• Selling an asset
• Gifting an asset (market value applies)
• Asset loss, theft, or destruction (depending on compensation)

Capital Gains Tax Rates (2025–2026)

CGT is taxed at your marginal income tax rate:

Income Range	Tax Rate
$0 – $18,200	0%
$18,201 – $45,000	16%
$45,001 – $135,000	30%
$135,001 – $190,000	37%
Over $190,000	45%

👉 There’s no fixed CGT rate—your total income determines how much tax you pay.

The 50% CGT Discount

One of the biggest advantages for investors:

✔ If you hold an asset for more than 12 months, you may reduce your capital gain by 50%

Example:

• Buy shares: $50,000
• Sell after 18 months: $100,000
• Gain: $50,000
• After 50% discount: $25,000 taxable

 CGT Exemptions You Should Know

You may not always have to pay CGT. Key exemptions include:

• ✅ Your main residence (family home)
• ✅ Partial exemption if used to generate income
• ✅ Personal-use assets under $10,000
• ✅ Cars and motorcycles
• ✅ Collectibles under $500
• ✅ Small business CGT concessions
• ✅ Inherited assets (special rules apply)

How to Calculate Capital Gains Tax

Follow these steps:

1. Determine the sale price (capital proceeds)
2. Calculate your cost base, including
   • • • • • Purchase price
           • Stamp duty
           • Legal fees
           • Agent commissions
3. Subtract cost base from sale price
4. Apply 50% discount (if eligible)
5. Add gain to your taxable income
6. Apply your tax rate

CGT Calculation Examples

Shares Example

• Buy: $10,000
• Sell: $15,000
• Gain: $5,000
• Tax: Based on your income bracket

Property Example

• Purchase: $500,000
• Costs: $20,000
• Sell: $650,000
• Gain: $130,000
• Discount applies if held >12 months

CGT on Different Asset Types

Shares

• Each reinvestment or bonus share may create a CGT event
• Accurate tracking is essential

Property

• Applies to investment properties
• Include renovation, legal, and selling costs
• Six-year rule may provide partial exemption

 

Cryptocurrency

• Every trade or transaction can trigger CGT
• Even using crypto for purchases counts
• Record keeping is critical

 

How to Legally Minimise CGT

Smart investors use these strategies:

✔ Hold assets for 12+ months
✔ Offset gains with capital losses
✔ Sell in a low-income year
✔ Spread sales across financial years
✔ Use superannuation contributions
✔ Take advantage of main residence exemptions

Common CGT Mistakes to Avoid

🚫 Forgetting to include costs (stamp duty, legal fees)
🚫 Poor record keeping
🚫 Incorrectly applying the 50% discount
🚫 Missing key dates

These mistakes can lead to overpaying tax or ATO penalties.

Record Keeping & Reporting

• Keep records for at least 5 years
• Include contracts, receipts, and transaction history
• Report CGT in the financial year of sale

Using accounting software can make this much easier.

Stay Ahead of Capital Gains Tax

Capital Gains Tax can significantly impact your investment returns—but with the right planning, you can minimise tax and maximise profits.

Whether you’re selling shares, property, or crypto, understanding CGT rules helps you make smarter financial decisions.

Need Help with CGT?

At Workpaper, our experienced accountants help you manage, calculate, and reduce Capital Gains Tax efficiently.

🌐 Website: https://workpaper.com.au/
📍 Address: 7 Bridge St, Werribee, Victoria 3030, Australia
📞 Phone: 0485 825 915
📧 Email: info@workpaper.com.au