Take an investor with $80,000 of other taxable income who sells an asset held for more than 12 months for a $100,000 capital gain. Because the asset was held over a year, the 50 percent individual discount applies, so only $50,000 of the gain is assessable. That $50,000 is stacked on top of the $80,000 income, lifting taxable income from $80,000 to $130,000. The whole $50,000 sits inside the 30 percent band, which runs from $45,001 to $135,000, so the extra tax is $50,000 times 0.30, or $15,000. The investor keeps $85,000 of the original $100,000 gain after tax. Without the discount the full $100,000 would be added to income and the tax bill would be far higher.
Step
Amount
How it is calculated
Australia has no separate capital gains tax rate. Instead the assessable gain is added to your income and taxed at your marginal rate. The calculator first applies the 50 percent discount if you held the asset for more than 12 months, halving the gain that counts. It then computes income tax on your income alone, and again on your income plus the assessable gain, and the CGT is the difference between those two figures. This stacking matters, because a large gain can push part of itself into a higher band. The discount only applies to individuals and trusts, not companies, and the full gain is assessable if the holding period is shorter than 12 months.
Frequently asked questions
How is CGT taxed in Australia?
There is no separate CGT rate. The capital gain (after any 50% discount for assets held more than 12 months) is added to your assessable income and taxed at your marginal rate. This means a large gain can push part of your income into a higher tax bracket.
Who qualifies for the 50% CGT discount?
Individuals and trusts that have held a capital gains tax asset for more than 12 months before the CGT event are eligible for the 50% discount. Companies do not qualify for the discount. Foreign resident individuals lost access to the discount for most assets from 8 May 2012.
Are there any assets exempt from CGT in Australia?
Your main residence (family home) is generally exempt from CGT under the main residence exemption, subject to conditions around partial use and absences. Personal use assets costing $10,000 or less, and most cars and motorcycles, are also exempt. The ATO publishes a full list of CGT exemptions and concessions on its website.
What records do I need to keep for CGT purposes?
The ATO requires you to keep records for every CGT asset from the date of acquisition until five years after you lodge the tax return in which the CGT event is reported. Records should include the purchase price, purchase date, any incidental costs such as stamp duty and brokerage, and the sale price and date. Good record keeping is especially important for assets held across multiple years.