CGT discount Australia: the complete guide for investors

What is the CGT discount?

Capital Gains Tax (CGT) in Australia is not a separate tax — it's part of your income tax. When you sell an asset for more than you paid for it, the gain is added to your taxable income and taxed at your marginal rate.

The CGT discount reduces the amount of capital gain that gets added to your taxable income. For Australian resident individuals who have held an asset for more than 12 months, only 50% of the capital gain is included in your assessable income. The other 50% is simply ignored.

Who qualifies for the CGT discount?

The 50% discount applies to:

• Australian resident individuals — the most common case. You must be an Australian tax resident at the time of the sale
• Trusts — the discount is passed through to individual beneficiaries
• Self-managed super funds (SMSFs) — but the discount is only 33.33% (not 50%) inside super

The discount does not apply to:

• Companies — no CGT discount at all
• Assets held for 12 months or less
• Foreign residents at the time of the CGT event
• Personal use assets and collectables under certain thresholds

How it works for shares

Let's say you bought 1,000 shares in a company at $10 per share ($10,000 total) and sold them 18 months later at $18 per share ($18,000).

Without the discount, you would have paid $3,760 in tax on this gain. With the discount, you pay $1,880 — saving $1,880 simply by holding for more than 12 months.

The 12-month clock

The 12-month holding period starts on the date you acquire the asset and ends the day before the date of sale. For shares bought on ASX, the acquisition date is the trade date (not the settlement date). The ATO calculates the holding period from the day after acquisition to the day of disposal.

How it works for investment property

The CGT discount is even more significant for property given the larger gains involved. The cost base for a property includes the purchase price plus eligible costs — stamp duty, legal fees, agent fees at purchase, and capital improvement costs. It does not include interest, council rates, or maintenance costs (these are deductible as expenses rather than added to cost base).

Without the discount, the tax would have been ~$119,028. The 50% CGT discount saves over $59,000 on this single transaction.

The primary residence exemption

Your main residence (home you live in) is generally fully exempt from CGT — this is separate from the 50% discount. You don't pay any CGT when you sell your primary place of residence, provided you've lived in it for the entire period of ownership and haven't used it to produce income.

The rules get more complex if you've rented part of your home, used it as a home office, or if it was ever an investment property before becoming your home. The ATO's "six-year rule" also allows you to treat a former home as your main residence for up to six years while renting it out.

CGT inside superannuation

Assets inside your super fund are taxed differently:

Phase	CGT rate on gains	Discount available
Accumulation phase	15%	33.33% discount if held 12+ months → effective rate 10%
Pension phase (account-based pension)	0%	Not applicable — no tax at all

This is one of the key reasons investment inside super is so tax-efficient. Even in accumulation phase, the effective CGT rate (10%) is significantly lower than the top marginal rate of 47% outside super.

Offsetting capital gains with capital losses

Capital losses must be used to offset capital gains before the 50% discount is applied. This ordering matters — losses reduce the gross gain first, then the discount is applied to the remainder.

If you have more losses than gains in a given year, the excess losses are carried forward indefinitely to offset future capital gains. There is no time limit on carrying forward capital losses.

Timing strategies around the CGT discount

Hold past 12 months

The most straightforward strategy — simply holding an asset for more than 12 months before selling. If you're 11 months into holding a position with a significant gain, the tax cost of selling early can be substantial.

Sell in a low-income year

Since capital gains are added to ordinary income, selling in a year when your other income is lower reduces the marginal rate at which the gain is taxed. This could be the year you retire, take parental leave, or otherwise have reduced employment income.

Spread large gains across financial years

If you have a large holding to liquidate, selling across two financial years can keep you in a lower tax bracket each year rather than pushing you into the top bracket in a single year.

Use super contributions to offset

In the year you realise a large capital gain, making deductible super contributions (up to the concessional cap) reduces your assessable income and thus the effective tax rate on the gain.

Tracking your CGT position

Effective CGT management requires knowing, for every position in your portfolio:

• The acquisition date and cost base for each parcel
• The current unrealised gain or loss
• Whether each parcel qualifies for the 12-month discount
• Any carried-forward capital losses available to offset