If you’ve sold assets like shares, property, or crypto during the financial year, you may need to report a capital gain or capital loss. This process is governed by Australia’s Capital Gains Tax (CGT) rules—and while CGT isn’t a separate tax, it’s a crucial part of your income tax return.
This guide explains what CGT is, how to calculate it, and how you can use the ATO’s CGT calculator and record keeping tool to make the process easier.
What Is Capital Gains Tax (CGT)?
Capital Gains Tax is the tax you pay when you make a profit from selling certain types of assets. You’ll have a capital gain when you sell an asset for more than what it cost you, and a capital loss if you sell for less.
You pay tax on your net capital gains, which is calculated as:
- Total capital gains
- Minus capital losses
- Minus any CGT discount you’re eligible for
What Assets Does CGT Apply To?
CGT generally applies to:
- Investment properties
- Shares
- Managed funds
- Cryptocurrencies
- Business assets
Some assets are exempt, like your main residence (home), certain personal-use assets, and depreciating business assets.
CGT in Action: A Quick Example
Example:
Justin, an Australian resident, buys land and sells it 18 months later, making a $10,000 profit.
Since he held the asset for more than 12 months, he qualifies for the 50% CGT discount.
He declares a net capital gain of $5,000 in his tax return.
CGT Discount
Australian residents may be eligible for a 50% CGT discount if they’ve held the asset for more than 12 months before selling. That means you only pay tax on half of the gain.
Discount rates vary:
- 50% for individuals and trusts
- 33.33% for complying super funds
- 0% for companies (they’re not eligible for the discount)
- Up to 60% for certain affordable housing investments
How to Calculate Your CGT
Here’s how to calculate CGT step-by-step:
Step 1: Work Out Your Capital Proceeds
This is what you received when you sold the asset. If you gave it away or sold it below market value, use the market value instead.
Step 2: Work Out Your Cost Base
This includes what you paid for the asset, plus:
- Stamp duty
- Legal and conveyancing fees
- Agent’s commission
- Improvement and holding costs (in some cases)
If you’re making a loss, use the reduced cost base.
Step 3: Calculate the Gain or Loss
Capital proceeds − Cost base = Capital gain or loss
- Positive result = Capital gain
- Negative result = Capital loss
Step 4: Repeat for Each Asset
You must do this for each CGT event during the financial year.
Step 5: Offset Capital Losses
Subtract any capital losses (including carried-forward losses from previous years) from your gains.
Tip: Apply losses to gains not eligible for the CGT discount first for the best tax outcome.
Step 6: Check the Result
If the remaining result is still positive, continue to Step 7. If it’s negative, you’ve made a net capital loss, which can be carried forward to future years but can’t reduce other income.
Step 7: Apply the CGT Discount
If eligible, apply the relevant CGT discount to reduce your remaining capital gain.
Step 8: Report in Your Tax Return
Your net capital gain is added to your assessable income and taxed at your marginal tax rate. Report it at Question 18 in your tax return (supplementary section).
Example: Single Asset CGT Calculation
Rhi buys an investment property for $500,000 and sells it 5 years later for $600,000.
Cost base:
Purchase + stamp duty + legal fees = $530,000
Sale fees (agent and conveyancing) = $12,500
Total cost base: $530,000Capital proceeds: $600,000
Capital gain: $600,000 – $530,000 = $70,000Since Rhi held the property for over 12 months, she applies the 50% CGT discount: $70,000 × 50% = $35,000 net capital gain
This amount is included in her income and taxed at her marginal rate.
Example: Multiple Assets
Rhi also sells shares in the same year and makes a $4,500 capital loss.
She offsets that loss against the $70,000 property gain: $70,000 – $4,500 = $65,500Then applies the 50% discount: $65,500 × 50% = $32,750 net capital gain
Tools to Help You
Calculating CGT can get complex, especially when multiple assets or carry-forward losses are involved. The ATO has an excellent tool to make it easier:
CGT Calculator and Record Keeping Tool
This tool helps you:
- Calculate your capital gain or loss
- Track each asset’s cost base and capital proceeds
- Save your data and access it via your myGov account
Final Tips
- Keep records for at least 5 years after the year you sell the asset
- Be aware of contract vs settlement dates—CGT applies on the contract date
- You can’t offset a net capital loss against your salary or rental income
- For assets acquired before 21 Sept 1999, consider indexation vs CGT discount to see which gives the better result
Whether you’re investing in shares, property, or digital assets, understanding your CGT obligations—and how to reduce them—can save you thousands at tax time. Use the ATO tools, keep good records, and consider getting advice from a tax agent if you’re unsure.
