Capital gains tax on shares and property in Australia: the 50% discount and main residence exemption

Sell an asset for more than you paid and the ATO usually wants a cut. Here's how to legally pay less of it.

By ECTD Editorial · Published 2026-05-15 · Updated 2026-05-15

Capital gains tax catches a lot of Australians off guard. It is not a separate tax with its own rate and its own bill. It is part of your income tax. When you sell an asset for more than it cost you, the profit gets added to your taxable income for that year and taxed at your marginal rate. The good news is that two of the most generous concessions in the entire tax system live here: the 50% CGT discount for assets held longer than 12 months, and the main residence exemption that can make the gain on your family home tax-free. Get the timing and the paperwork right and you can legally pay far less.

What CGT actually is (and what triggers it)

A capital gain happens when a 'CGT event' occurs and you make a profit on an asset. The most common CGT event is simply selling something: shares, an investment property, a parcel of cryptocurrency, a managed fund holding, even a block of land. The capital gain is the difference between what you received and your 'cost base' (more on that below).

The key word is realised. A share that has doubled on paper triggers no CGT while you still hold it. The tax event only fires when you actually dispose of the asset. Holding $200,000 of CBA shares that you bought for $100,000 creates a $0 tax bill until the day you sell. That single fact is the most powerful planning lever you have, because you usually choose the year the event lands in.

CGT is reported through your normal income tax return via myGov or your registered tax agent. There is no separate CGT form to lodge and no separate due date. The net capital gain for the year flows into the same return that captures your salary, interest and dividends.

Gain or income?: If you buy and sell shares frequently with the intention of turning a quick profit, the ATO may treat you as a share trader rather than an investor. Traders are taxed on profits as ordinary business income and miss out on the 50% CGT discount entirely. Most people who buy and hold are investors, but high-frequency activity changes the picture.

The 50% discount: the 12-month rule that matters most

If you are an individual (or a trust) and you have held the asset for at least 12 months before the CGT event, you only pay tax on half the gain. This is the single most valuable CGT concession available to ordinary investors, and it rewards patience directly.

The 12 months is counted from the day after you acquired the asset to the day the CGT event happens. Crucially, the relevant date for a sale is usually the contract date, not the settlement date. Sign a contract to sell an investment property at 11 months and three weeks and you have missed the discount, even if settlement happens months later. With shares, the trade date is what counts, not when the cash hits your account.

Companies do not get the 50% discount. Self-managed super funds in accumulation phase get a one-third discount rather than a half. For most everyday investors holding assets in their own name, though, the rule is simple: cross the 12-month line and the taxable portion of your gain is halved.

Don't let the tax tail wag the dog: Holding an asset a few extra weeks to qualify for the discount can be worth thousands. But never hold a falling investment purely to hit the 12-month mark. A discount on a smaller gain can easily be worse than selling earlier at a higher price. Run the actual numbers, not the calendar.

Cost base: what you can add to reduce the gain

Your cost base is not just the purchase price. It is made up of several elements, and getting them all in lowers your taxable gain dollar for dollar. The cost base generally includes:

The price you paid for the asset
Incidental costs of buying and selling — brokerage on shares, stamp duty on property, legal and conveyancing fees, agent's commission on sale
Costs of owning the asset (for assets acquired after 20 August 1991) such as rates, land tax, insurance and interest — but only where you have not already claimed them as a tax deduction
Capital costs to improve or preserve the asset, like a renovation or a new structure
Capital costs of establishing or defending your title to the asset

For property investors, the trap is the third point. If you negatively geared the property and claimed the interest and rates as deductions each year, you cannot also count them in the cost base. You only get one bite. Keep every receipt regardless — the ATO expects you to be able to substantiate the cost base, and property held for 20 years can accumulate a large, legitimate pile of capital improvement costs that genuinely shrink the gain.

Depreciation comes back to bite: If you claimed capital works (building) deductions on an investment property, the amount you claimed is generally removed from your cost base when you sell, which increases your capital gain. This catches a lot of investors who forget that deductions taken over many years effectively get clawed back at sale. It is not a reason to skip the deductions — it is a reason to expect the larger gain and plan for it.

Capital losses: the cushion that carries forward

Not every investment wins. When you sell an asset for less than its cost base, you make a capital loss. A capital loss cannot reduce your salary or other ordinary income — it can only be offset against capital gains. But it is a genuinely useful tool.

The mechanics matter for the discount. You must apply capital losses against your gross capital gains before you apply the 50% discount. So if you have a $20,000 gain on a long-held asset and a $20,000 loss elsewhere, the loss wipes out the gain entirely and the discount is irrelevant. If you have a $20,000 gain and only a $5,000 loss, you subtract the loss first ($15,000), then halve the remainder, leaving $7,500 to be taxed.

Unused capital losses are not lost. They carry forward indefinitely to future years until a capital gain comes along to soak them up. Many investors deliberately realise a loss on a dud holding in the same year they crystallise a large gain to reduce the net amount taxed — a legitimate strategy, provided you are genuinely disposing of the asset and not engaging in a 'wash sale' designed purely to manufacture a deduction, which the ATO actively targets.

The main residence exemption: your home, usually tax-free

Here is the concession that quietly does the most heavy lifting in Australian household wealth. The home you live in — your main residence — is generally fully exempt from CGT. Sell the family home for a $400,000 gain after years of ownership and, in the typical case, the tax bill is zero.

To get the full exemption the property generally needs to have been your home for the whole ownership period, you must not have used it to produce income (no renting out rooms or running a business from it), and it must sit on land of two hectares or less. You can only have one main residence at a time, with a short overlap allowed when you are moving between homes.

Two features make the exemption more flexible than people expect. The 'six-year rule' lets you move out and rent the property out for up to six years while still treating it as your main residence for CGT purposes — as long as you are not claiming another property as your main residence at the same time. And the 'first used to produce income' rule can reset your cost base to the market value on the day you first rent it out, so you are only taxed on the growth from that point forward.

Partial exemptions are common: If you rented out part of your home, ran a business from it, or used the six-year rule beyond its limits, the exemption is reduced proportionally and CGT applies to part of the gain. The home exemption is generous but it is not automatic in every situation. Where serious money is involved, confirm your position before you sign a sale contract — the contract date locks in the tax year.

Shares vs property: how CGT plays out differently

The CGT rules are the same for both, but the practical experience differs. With shares and ETFs, you typically sell a parcel at a time, brokerage is small, and you can fine-tune exactly how much gain you realise in a year by choosing how many units to sell. You can also choose which parcels to sell when you have bought the same share at different prices over time — selling the highest-cost-base parcels first to minimise the gain. Keep clear records of each purchase; the ATO expects you to track parcels.

With property, the gain usually arrives in one large, lumpy event that can push you into the top marginal bracket for that single year. There is no partial sale. The cost base is much larger and includes stamp duty and improvements, and the depreciation clawback above applies. Because the whole gain lands at once, timing the sale into a lower-income year — say, a year you take parental leave or retire — can save a meaningful amount of tax.

Worked example: selling shares held more than 12 months

Meet Priya. In March 2024 she bought 1,000 shares at $40 each, paying $40,000 plus $20 brokerage — a cost base of $40,020. In May 2026, more than two years later, she sells all 1,000 shares at $70 each, receiving $70,000 less $30 brokerage, so $69,970 in proceeds.

Gross capital gain: $69,970 proceeds − $40,020 cost base = $29,950.
Apply capital losses first. Priya also sold an underperforming ETF this year for a $4,000 capital loss. She subtracts it: $29,950 − $4,000 = $25,950.
Apply the 50% discount. Because she held the shares well over 12 months, she halves the remaining gain: $25,950 ÷ 2 = $12,975.
Add to taxable income. That $12,975 is added to Priya's other income for the 2025–26 year.
Tax payable on the gain. Priya's salary already puts her in the 30% bracket (income between $45,000 and $135,000). The gain is taxed at 30%: $12,975 × 30% = $3,892.50, plus the 2% Medicare levy of about $259.50, for roughly $4,152 of extra tax.

Without the 50% discount, the taxable amount would have been the full $25,950 and the tax bill would have been roughly double. Without the $4,000 loss to offset, she would have been taxed on more again. The two concessions, stacked in the right order, did the heavy lifting. Note the order is fixed: losses come off the gross gain first, then the discount applies to what remains.

Super can soak up a big gain: If a large capital gain lands in a high-income year, making a concessional (before-tax) super contribution up to the $30,000 cap can reduce your taxable income and the tax on that gain at the same time. Contributions inside the cap are generally taxed at 15% in the fund rather than your marginal rate. It is one of the few legal ways to blunt a one-off gain — check your available cap, including any unused carry-forward amounts, before you act.

Records, timing and the practical takeaways

CGT punishes poor record-keeping more than almost any other part of the tax system, because the events that matter may be decades apart. Keep purchase contracts, brokerage notes, conveyancing invoices, renovation receipts and any documents that establish your cost base. The ATO can ask you to substantiate the gain years after the sale.

The handful of things worth remembering:

CGT is part of your income tax, taxed at your marginal rate — there is no separate flat CGT rate for individuals.
Hold an asset more than 12 months as an individual and you halve the taxable gain via the 50% discount.
The contract (or trade) date, not settlement, usually decides which tax year the gain falls in.
Apply capital losses to the gross gain before the 50% discount; unused losses carry forward indefinitely.
Your main residence is generally CGT-free, with flexibility from the six-year rule and the market-value reset when you first rent it out.
Time large gains into lower-income years and consider concessional super contributions to soften the hit.

None of this requires aggressive schemes. The biggest CGT savings for most Australians come from two boring habits: holding quality assets past the 12-month mark, and keeping the receipts that prove your cost base. The system is built to reward patient ownership of your home and your investments — the concessions are there for the taking if you simply plan the timing and keep your paperwork in order.

General advice warning: This article is general information only and does not take into account your personal circumstances. It is not personal financial, tax or legal advice. CGT rules contain many exceptions, and your situation may differ. Before making decisions about selling shares or property, consult a registered tax agent or licensed financial adviser, and check current rules and thresholds on the ATO website (ato.gov.au).

General information only — not personal financial, tax, legal or medical advice. Consider your own situation and consult a licensed professional before acting. Figures are current as at the date shown above.