What is capital gains tax?

How capital gains tax (CGT) works, and how you report and pay tax on capital gains when you sell assets.

Last updated 23 June 2025

Capital gains tax (CGT) is the tax you pay on profits from disposing of assets including investments, such as property, shares and crypto assets. Although it is referred to as ‘capital gains tax’, it’s part of your income tax. It’s not a separate tax.

If you dispose of assets (generally when you stop being the owner of an asset) a CGT event may be triggered. This is when you need to report capital gains and capital losses in your tax return.

If you have a:

• capital gain, it will increase the tax you need to pay – you may want to work out how much tax you’ll owe and set aside funds to cover it
• capital loss, you can offset it against any capital gains in the year they occur, or in future years, and reduce the tax you need to pay – it’s important to include losses in your tax return.

Carefully choose to be a “Share Trader” or to be a “Investor”. Investment is categorized as Capital in nature and the taxabe point applies. “Trader” will be treated as a business-like venture and any losses from such business transactions could offset your PAYG Income.

How the CGT discount works

When you sell or otherwise dispose of an asset, you can reduce your capital gain by 50%, if both of the following apply:

• you owned the asset for at least 12 months
• you are an Australian resident for tax purposes.

This is called the capital gains tax (CGT) discount.

12-month ownership requirement

For an asset to qualify for the CGT discount you must own it for at least 12 months before the ‘CGT event’ happens. The CGT event is the point at which you make a capital gain or loss. You exclude the day of acquisition and the day of the CGT event when working out if you owned the CGT asset for at least 12 months before the ‘CGT event’ happens. 

• If you sell the asset and there is no contract of sale, the CGT event happens at the time of sale.
• If there is a contract to sell the asset, the CGT event happens on the date of the contract, not when you settle. Property sales usually work this way.
• If the asset is lost or destroyed, the CGT event happens when:
  • you first receive an insurance payment or other compensation
  • if there is no insurance payment or compensation, when the loss occurred or was discovered.

Trusts and companies

If an asset is owned for at least 12 months:

• Australian trusts can discount a capital gain by 50%
• complying super funds can discount a capital gain by 33.33%.

Companies cannot use the CGT discount.

How to use the CGT discount

Calculating your CGT explains how to use the CGT discount to reduce your tax. Briefly, this is how it works:

1. If you have any capital losses from other assets, you must subtract these from your capital gains before applying the discount.
2. If you are entitled to the discount for an asset, you reduce the remaining capital gain on that asset by 50% and report this amount in your income tax return.
3. Complying super funds / SMSF’s reduce their capital gain by 33.33%.