Australia Capital Gains Tax Guide
Australian Capital Gains Tax (CGT). The guide covers: the CGT system — the CGT is NOT a separate tax; the net capital gain is included in the assessable income and taxed at the marginal rate (for the individuals) or the corporate rate (for the companies); the CGT applies to the disposal of the assets acquired on or after 20 September 1985 (the assets acquired before this date are "pre-CGT assets" and are exempt from the CGT); the CGT events (the "CGT events") — the most common CGT event is the "CGT event A1 — the disposal of the asset" (the sale, the gift, the exchange); the other CGT events include: (a) the CGT event D1 — the creation of the contractual rights, (b) the CGT event D2 — the granting of the option, (c) the CGT event K4 — the shares in the company that has the pre-CGT assets, (d) the CGT event C1 — the loss or the destruction of the asset, (e) the CGT event C2 — the cancellation, the surrender, or the expiry of the asset; the 50% CGT discount (for the individuals) — the Australian resident individuals and the trusts are entitled to the 50% CGT discount if the asset is held for at least 12 months (the "12-month holding period"); the discount applies to the capital gain (NOT to the capital loss); the companies and the corporate entities do NOT benefit from the 50% CGT discount; the superannuation funds benefit from the 33.33% CGT discount; the main residence exemption (the "main residence exemption") — the capital gain or the capital loss on the disposal of the taxpayer's "main residence" (the "principal place of residence") is generally exempt from the CGT; the exemption applies to the dwelling and the land up to 2 hectares; the exemption is lost if: (a) the residence is used for the business purposes (the "business use"), (b) the residence was not the main residence for the full ownership period (the "absence from the residence"), (c) the land area exceeds 2 hectares, (d) the residence is owned by the foreign resident (from 1 July 2020 — the foreign residents cannot claim the main residence exemption for the dwellings acquired after 30 June 2020); the temporary absence rule (the "6-year rule") — the taxpayer can treat the former main residence as the main residence for up to 6 years if the property is rented out (the "6-year absence rule"); the taxpayer can treat the former main residence as the main residence for an indefinite period if the property is NOT rented out (the "absence rule without the rent"); the CGT on the shares and the ETFs — the CGT applies to the disposal of the shares, the ETFs, the managed funds, and the crypto assets; the 50% CGT discount applies to the shares held for at least 12 months; the capital loss on the shares can be offset against the capital gains from the same year or carried forward; the small business CGT concessions (the "small business CGT concessions") — the Australian resident small business entities can access the concessions if: (a) the aggregated turnover is below $10 million, OR (b) the net asset value is below $6 million; the concessions include: (i) the 15-year exemption (the "15-year exemption" — the CGT is exempt if the asset is held for at least 15 years and the owner is at least 55 years old and retires), (ii) the 50% active asset reduction (the "50% active asset reduction" — the capital gain on the "active asset" is reduced by 50%), (iii) the retirement exemption (the "retirement exemption" — the capital gain up to $500,000 is exempt if the proceeds are contributed to the superannuation fund), (iv) the rollover (the "CGT rollover" — the capital gain is deferred if the replacement asset is acquired); the foreign resident CGT withholding (the "CGT withholding") — the purchaser of the Australian property from the foreign resident must withhold the CGT at the rate of 12.5% (for the properties valued at $750,000 or more) or 15% (for the properties valued at $750,000 or more — from 1 January 2025, the threshold was removed and the rate was changed to 15% for ALL values, and the rate of 12.5% for the properties below $750,000 was removed); the vendor must obtain the "Clearance Certificate" from the ATO to avoid the withholding. All amounts in Australian Dollars (AUD). For related reading, see our Property Tax Guide → and Personal Tax Guide →.
CGT Discount by Entity
- Individuals: 50% discount for the assets held for at least 12 months. The discount applies to the capital gain after the offset of the capital losses. The discounted gain is included in the assessable income at the marginal rate.
- Companies: No CGT discount. The companies pay the corporate tax (25% or 30%) on the full net capital gain. The small business CGT concessions (the 50% active asset reduction, the 15-year exemption) are available to the companies meeting the small business test.
- Superannuation funds: 33.33% discount for the assets held for at least 12 months. The discount applies to the complying superannuation funds and the SMSFs in the accumulation phase.
- Trusts: 50% discount for the trusts, but the discount flows through to the beneficiaries (the beneficiaries are entitled to the discount based on the trust's holding period and the residency status).
For the CGT on the collectibles (the assets acquired for $500 or more) and the personal use assets, see our Personal Tax Guide →.
Main Residence Exemption
- Full exemption: The capital gain on the disposal of the main residence is fully exempt from the CGT. The exemption applies to the dwelling and the land up to 2 hectares. The dwelling must be used as the main residence (the "principal place of residence") for the full ownership period.
- 6-year rule: The taxpayer can treat the former main residence as the main residence for up to 6 years while the property is rented out. The 6-year period starts from the date the property ceases to be the main residence. The taxpayer can only apply the 6-year rule to one property at a time.
- Foreign residents: From 1 July 2020, the foreign residents cannot claim the main residence exemption for the dwellings acquired after 30 June 2020. The foreign residents who owned the property before 1 July 2020 can claim the exemption until 30 June 2020 (the "cut-off date").
For the CGT withholding on the foreign resident property sales, see our Property Tax Guide →.