Capital Gains Tax
Capital Gains Tax—or CGT—may apply when you sell, transfer or otherwise dispose of an asset for more than it cost you.
CGT is not a separate tax. Your taxable capital gain is included in your assessable income and taxed as part of your annual income tax assessment.
What assets can be subject to CGT?
CGT can apply to many different assets, including:
Investment and holiday properties
Vacant land
Commercial property
Shares
Units in trusts and managed funds
Cryptocurrency
Businesses and business assets
Some personal-use assets and collectables
Certain contractual and other legal rights
Some assets are exempt or receive special treatment. These can include your main residence, cars and assets acquired before 20 September 1985. Conditions and exceptions apply.
When can CGT arise?
The most common CGT event is selling an asset. However, CGT may also arise when an asset is:
Gifted or transferred to another person
Transferred to a family member, related entity or superannuation fund
Compulsorily acquired
Lost, destroyed or surrendered
Cancelled or brought to an end
Giving an asset away does not necessarily avoid CGT. If an asset is transferred for no payment or less than its market value, it may be treated as having been sold at market value.
An increase in an asset’s value is not usually taxed until the asset is sold, transferred or another CGT event occurs. You may also receive a taxable capital gain distribution from a managed fund or trust.
Capital gains and capital losses
Broadly, a capital gain arises when the amount received for an asset exceeds its cost base. The cost base may include the original purchase price and certain acquisition, ownership, improvement and selling costs.
A capital loss may arise when an asset is disposed of for less than its reduced cost base.
Capital losses can generally be used only to reduce capital gains. They cannot be deducted against salary, wages, business income or other ordinary income. Unused capital losses can usually be carried forward to future years.
CGT discounts and concessions
Individuals and trusts may currently qualify for a 50% CGT discount where an asset has been owned for at least 12 months.
Additional CGT concessions may be available for eligible small business owners. Other exemptions and rollover provisions may also apply, depending on the asset and the circumstances of the transaction.
Changes from 1 July 2027
The CGT rules will change for gains accruing from 1 July 2027.
For most assets held by individuals and trusts, the existing 50% CGT discount will generally be replaced by cost-base indexation. Indexation adjusts the cost base for inflation so that tax is calculated on the real increase in the asset’s value.
A minimum tax rate of 30% will also generally apply to real capital gains, subject to certain exemptions.
These changes apply broadly to assets including property, shares, managed investments and business interests.
Transitional rules will apply to assets owned before 1 July 2027. Broadly, the gain accruing before that date may remain eligible for the existing 50% discount, while the gain accruing from 1 July 2027 will generally be subject to the new rules.
Special rules will apply to qualifying new residential properties.
Keep your records
It is important to retain records relating to:
The purchase of the asset
Stamp duty and legal expenses
Capital improvements
Relevant ownership costs
Selling expenses
Any other amounts that may form part of the cost base
The value of an asset at 1 July 2027 may also become important under the transitional rules.
CGT is a complex area and the outcome depends on the asset, how it has been used, the ownership structure and the circumstances of the disposal. We recommend obtaining advice before selling, gifting or transferring an asset.
