What is capital gains tax?
Capital gains tax (CGT) is the tax you pay on profits from disposing of assets including investments, such as property, shares and crypto assets. Although it is referred to as 'capital gains tax', it's part of your income tax. It's not a separate tax.
If you dispose of assets (generally when you stop being the owner of an asset) a CGT event may be triggered. This is when you need to report capital gains and capital losses in your income tax return.
If you have a:
- capital gain, it will increase the tax you need to pay – you may want to work out how much tax you will owe and set aside funds to cover it
- capital loss, you can offset it against any capital gains in the year they occur, or in future years, and reduce the tax you need to pay – it's important to include losses on your tax return.
Example: calculating CGT
Maree buys some shares for $5,000.
She owns the shares for 6 months and sells them for $5,500. She has no other capital gains or losses.
Maree declares a capital gain of $500 in her tax return. She will pay tax on this gain at her individual income tax rate.
CGT reform — from 1 July 2027
From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is abolished for gains accruing after that date. In its place, CPI indexation of the cost base returns, and a 30% minimum tax applies to capital gains. Every CGT asset is deemed to be revalued at its market value on 1 July 2027 — gains accrued before that date keep the 50% discount when the asset is later sold. Assets acquired before 20 September 1985 lose their pre-CGT exemption for growth after 1 July 2027.
Companies and the main residence exemption are unchanged, superannuation funds keep the one-third discount, and new residential dwellings retain an optional 50% discount. (Treasury Laws Amendment (Tax Reform No. 1) Act 2026.)