Capital Gains Tax

If you sold assets during the year, such as property or shares, you need to work out your capital gain or loss for each asset. You pay tax on your net capital gains.

What you pay tax on

When you sell an asset for:

• more than it cost you – you have a capital gain
• less than it cost you – you have a capital loss.

You pay tax on your net capital gains. This is:

• your total capital gains
• less any capital losses
• less any discount you are entitled to on your gains.

There is a capital gains tax (CGT) discount of 50% for Australian individuals who own an asset for 12 months or more. This means you pay tax on only half the net capital gain on that asset.

Example: working out CGT for a single asset

Rhi buys an investment property for $500,000 and sells it 5 years later for $600,000.

She has no other capital gains or losses.

Using the steps above, Rhi works out her capital gain as follows.

• The capital proceeds from the CGT event are $600,000.
• The cost base is $530,000, made up of:purchase costs of $500,000 + $15,000 stamp duty + $1,200 conveyancing feessale costs of $1,300 conveyancing fees + $12,500 agent's commission.
• Rhi’s capital gain on the investment property is:
  $600,000 − $530,000 = $70,000
• Rhi has no other capital gains or losses, so she skips to step 7.
• This step is not applicable.
• This step is not applicable.
• Rhi can use the CGT discount to reduce her capital gain because she is an Australian resident and owned the asset for at least 12 months:
  $70,000 × 50% = $35,000
• Rhi reports a net capital gain of $35,000 in her income tax return. She will pay tax on this gain at her marginal income tax rate. The capital gain for the property happens on the date of the sale contract, not the date of settlement. For example, if contracts are exchanged on 4 June 2021 and settlement happens on 6 July 2021, Rhi must report her capital gain in her income tax return for the financial year ending 30 June 2021.