Capital gains tax on property and shares: the basics

Capital gains tax is not a separate tax. When you sell an asset for more than it cost, the gain is added to your taxable income for that year and taxed at your normal rates. Understanding a few key rules can make a large difference to the tax you pay.

What CGT applies to

CGT commonly applies when you sell or dispose of:

• Investment properties and land
• Shares, units in managed funds and ETFs
• Cryptocurrency, including swapping one crypto for another
• Collectables and personal use assets above certain values

Working out the gain

Your capital gain is broadly the sale price less your cost base. The cost base includes more than the purchase price, such as:

• Stamp duty, legal fees and buyer's agent fees on purchase
• Capital improvements, such as renovations or extensions
• Selling costs, such as agent commission and advertising

For investment properties, some deductions you claimed during ownership, such as capital works deductions, reduce your cost base.

The 50% CGT discount

If you are an Australian resident individual and you held the asset for at least 12 months, you can generally reduce your capital gain by 50% after applying any capital losses. Trusts can also pass the discount through to individual beneficiaries. Companies cannot use the discount.

Timing matters. The relevant date is usually the date you signed the contract, not settlement, so selling a few weeks too early can cost you the discount.

Your home: the main residence exemption

Your main residence is generally exempt from CGT. The exemption can be reduced if the home was rented out, used to produce income, or sat on land larger than two hectares. Special rules can let you treat a former home as your main residence for a period after you move out, even while renting it.

Capital losses

Capital losses can only be offset against capital gains, not against your salary. Unused losses carry forward to future years indefinitely.

Records to keep

Keep contracts, settlement statements, invoices for improvements and broker statements for the entire time you own an asset, plus five years after the sale. For shares bought in parcels over time, keep records of each purchase.

We calculate capital gains and losses as part of every individual tax return, including for investors with multiple properties and share portfolios.