If you sold assets during the year, such as property or shares, you need to work out your capital gain or loss for each asset.
When you sell an asset for:
- more than it cost you – you have a capital gain
- less than it cost you – you have a capital loss.
You pay tax on your net capital gains. This is:
- your total capital gains
- less any capital losses
- less any discount you are entitled to on your gains.
There is a capital gains tax (CGT) discount of 50% for Australian individuals who own an asset for 12 months or more. This means you pay tax on only half the net capital gain on that asset.
Some assets are exempt from CGT, such as your home.
Example: CGT with discount
Justin, an Australian resident, buys a block of land. He owns it for 18 months and sells it, making a profit of $10,000. He has no capital losses.
Justin is entitled to the 50% CGT discount for the land. He will declare a capital gain of $5,000 in his tax return.End of example
Work out your CGT using our online calculator and record keeping tool. You can also access the tool and save your data through your myGov accountExternal Link.CGT calculator and record keeping tool
Step 1: Work out what you received for the asset
- This is your capital proceeds. It is what you receive when you sell the asset or another CGT event happens to it – for example, if the asset is destroyed and you receive an insurance payout.
- If you give an asset away or sell it to a friend for less than it is worth, your capital proceeds are the market value of the asset.
Step 2: Work out your costs for the asset
- This is your cost base. It is what it cost you to acquire the asset, plus certain other costs you had to acquire, hold and dispose of the asset.
- If you made a loss on the asset, you work out the loss amount using the reduced cost base.
- If you made a gain on the asset and acquired it before 21 September 1999 you can index the costs for inflation up to that date instead of using the CGT discount to reduce your capital gain. This may give you a lower net capital gain in some circumstances, such as if you also have capital losses.
Step 3: Subtract the costs (2) from what you received (1). If the result is:
- more than zero, you have a capital gain for this asset
- less than zero, you have a capital loss for this asset (make sure you used the reduced cost base at step 2).
Step 4: Repeat steps 1–3 for each CGT event you have had this financial year
- for example, for each asset you have sold.
Step 5: Subtract your capital losses from your capital gains
- If you have no allowable capital losses, skip to step 7.
- If you have a net capital loss carried forward from previous years, subtract this first.
- You can choose which capital gains to subtract your losses from. If you have any capital gains that are not eligible for the CGT discount, subtract your losses from these gains first. This will give you the best result (the lowest CGT).
Step 6: If the remaining amount is:
- more than zero – go to step 7
- less than zero – this is your net capital loss. Go to step 8.
Step 7: Apply the CGT discount (50% for individuals and trusts) to any remaining capital gains that are eligible
- Generally, a capital gain is eligible for the discount if you are an Australian resident and you owned the asset for at least 12 months.
- If you owned an asset less than 12 months you cannot discount a capital gain on that asset.
- For complying super funds the discount is 33.33%. Companies cannot use the discount.
- If you owned an affordable housing fixed domestic residential property, such as a house, unit or apartment, the discount is 60%
- If you acquired the asset before 21 September 1999 and chose to index its cost base at step 2, you cannot use the discount.
Step 8: Report your net capital gain or loss in your income tax return
- If you have a net capital gain you pay tax on the gain at your marginal income tax rate.
- If you have a net capital loss you cannot deduct it from your other income but you can carry it forward to reduce capital gains you make in future years.
Example: working out CGT for a single asset
Rhi buys an investment property for $500,000 and sells it 5 years later for $600,000.
She has no other capital gains or losses.
Using the steps above, Rhi works out her capital gain as follows.
- The capital proceeds from the CGT event are $600,000.
- The cost base is $530,000, made up of:
- purchase costs of $500,000 + $15,000 stamp duty + $1,200 conveyancing fees
- sale costs of $1,300 conveyancing fees + $12,500 agent's commission.
- Rhi’s capital gain on the investment property is:
$600,000 − $530,000 = $70,000
- Rhi has no other capital gains or losses, so she skips to step 7.
- This step is not applicable.
- This step is not applicable.
- Rhi can use the CGT discount to reduce her capital gain because she is an Australian resident and owned the asset for at least 12 months:
$70,000 × 50% = $35,000
- Rhi reports a net capital gain of $35,000 and a capital gain of $70,000 at labels A and H respectively in item 18 in her supplementary income tax return. She will pay tax on this gain at her marginal income tax rate.
The capital gain for the property happens on the date of the sale contract, not the date of settlement. For example, if contracts are exchanged on 4 June 2023 and settlement happens on 6 July 2023, Rhi must report her capital gain in her income tax return for the financial year ending 30 June 2023.End of example
Example: working out CGT for multiple assets
Take the same facts as above, except that in addition to the investment property, Rhi also sells some shares in the same financial year.
- Rhi bought 1,000 shares at $10 each for a total of $10,000, including stamp duty and brokerage costs.
- Rhi sells the shares (at a loss) for $5,500. There are no brokerage costs on the sale of the shares.
Using the steps above, Rhi works out her net capital gain or loss as follows.
- The capital proceeds from the sale of the shares are $5,500.
- The reduced cost base is $10,000. This includes stamp duty and brokerage, which are costs Rhi had to acquire the asset.
- Rhi’s capital loss on the shares is:
$5,500 − $10,000 = ($4,500)
- Rhi also had a capital gain of $70,000 on her investment property (see previous example).
- $70,000 (gains) − $4,500 (losses) = $65,500
- Rhi has a capital gain so she continues to step 7.
- Rhi can use the CGT discount to reduce the remaining capital gain on her investment property:
$65,500 × 50% = $32,750
- Rhi reports a net capital gain of $32,750 and a capital gain of $65,500 at labels A and H respectively in item 18 in her supplementary income tax return. She will pay tax on this gain at her marginal income tax rate.