Key takeaways
- A net capital gain is added to your income and taxed at your marginal rate.
- Individuals and trusts can generally discount gains by 50% after 12 months; companies can't.
- Your home is generally exempt if it was your main residence throughout.
- Capital losses only offset capital gains — they carry forward indefinitely.
Capital gains tax (CGT) isn't a separate tax. When you sell an asset such as an investment property, shares or crypto for more than it cost, the net capital gain is included in your taxable income.
When does CGT apply?
CGT applies when a 'CGT event' happens — most commonly when you sell or dispose of an asset. For property, the event generally happens on the date you sign the contract, not at settlement, which can determine the financial year the gain falls in. Swapping one cryptocurrency for another is also generally a CGT event.
Working out the gain
Your capital gain is the sale proceeds less the cost base. The cost base includes the purchase price plus incidental costs such as stamp duty and legal fees, capital improvements, and selling costs such as agent commissions.
| Item | Amount |
|---|---|
| Sale price | $850,000 |
| Purchase price | −$600,000 |
| Stamp duty and legal fees on purchase | −$30,000 |
| Capital improvements | −$20,000 |
| Agent and legal fees on sale | −$18,000 |
| Capital gain | $182,000 |
| 50% CGT discount | −$91,000 |
| Net capital gain added to taxable income | $91,000 |
The 50% discount
Individuals and trusts can generally reduce a capital gain by 50% if they owned the asset for at least 12 months. Complying super funds receive a one-third discount. Companies don't receive a discount. Foreign residents generally can't access the discount for gains accrued after 8 May 2012.
Your home
Your main residence is generally exempt from CGT. If it was rented out or used to produce income for part of the time, a partial exemption may apply. In some cases, you can continue to treat a former home as your main residence for up to six years while it's rented out.
Capital losses
Capital losses can only be offset against capital gains, not against salary or other income. They're applied before the discount, and unused losses carry forward to future years.
Official sources
General information only. This article doesn't take into account your personal circumstances and isn't a substitute for professional advice. Tax rules and thresholds change — check current details with the ATO or contact us for advice specific to you.
Published by
ANS Taxation & Accounting
Melbourne accounting and tax practice