Capital Gains Tax on Shares: A Beginner's Guide (Australia)

If you've ever sold shares at a profit, you've triggered what the ATO calls a "CGT event" — and you'll generally need to include that gain in your tax return.

Capital gains tax (CGT) trips up a lot of new investors, partly because it isn't a separate tax at all — it's folded into your regular income tax. This guide walks through how CGT on shares works today, including the current 50% discount, and also covers a major reform that's currently before Parliament and could change the rules from 1 July 2027.

What is capital gains tax?

Capital gains tax isn't a standalone tax — it's part of the ordinary income tax system. When you sell shares for more than you paid, the profit (the "capital gain") is added to your other assessable income for the year, and taxed at your marginal tax rate. Sell for less than you paid, and you make a capital loss instead, which can be used to reduce gains (more on that below).

When does CGT apply to shares?

CGT applies whenever you have a "CGT event" — most commonly, selling your shares. Other events (like a company merger changing your shareholding, or transferring shares out of your name) can also trigger CGT, so it's not only outright sales.

Small clarifying point: if you're classified as a share trader rather than a share investor — broadly, buying and selling shares as a business rather than for long-term investment — different tax rules can apply. Most everyday investors are treated as investors for CGT purposes, but if you trade frequently or in large volumes, it's worth checking your position with a registered tax agent.

How to calculate a capital gain or loss

The basic formula is:

Capital gain (or loss) = Sale proceeds − Cost base

Your cost base generally includes:

• The price you paid for the shares

• Brokerage paid on the purchase

• Other incidental costs of acquiring or disposing of the shares (e.g. brokerage on the sale)

Worked example

Say you bought 100 shares at $45 each, paying $15 brokerage.

• Cost base = (100 × $45) + $15 = $4,515

You later sell all 100 shares at $52 each, paying another $15 brokerage.

• Sale proceeds = (100 × $52) − $15 = $5,185

• Capital gain = $5,185 − $4,515 = $670

If you'd held the shares for less than 12 months, the full $670 gets added to your assessable income for the year.

The 50% CGT discount (current rules)

Under the rules that apply today, if you're an Australian resident individual (or a trust) and you've held the shares for more than 12 months before selling, you may be entitled to a 50% CGT discount — only half the gain is included in your taxable income. Capital losses are generally applied before the CGT discount is calculated.

The 12-month clock starts the day after you acquire the shares.

Worked example with the discount applied

Using the example above, but assume you held the shares for 14 months before selling:

• Capital gain = $670

• Because you held for more than 12 months, only 50% is taxable: $670 × 50% = $335

• That $335 is added to your assessable income and taxed at your marginal rate — for example, at a 32.5% marginal rate, tax payable on this gain would be roughly $109.

Compare that to selling after only 10 months: the full $670 would be added to your income, with no discount available.

Capital losses

If you sell shares for less than your cost base, you make a capital loss. Capital losses:

• Can only be offset against capital gains (yours or your fund's) — not against ordinary income like salary or wages

• Can be carried forward indefinitely to offset gains in future years if you don't have enough gains to use them against this year

Example: You sell Share A for a $2,000 loss and Share B for a $3,000 gain in the same financial year. Your net capital gain is $1,000. If you held Share B for more than 12 months, only $500 of that net gain is taxable.

Which shares did you actually sell? (Parcel selection)

If you've bought the same share at different times and prices (different "parcels"), you need a method for identifying which parcel you sold when you only sell part of your holding. Two common approaches accepted by the ATO are:

• First-in-first-out (FIFO): you're treated as selling your oldest parcel first

• Specific identification: you nominate exactly which parcel you're selling, provided you keep clear records showing this

Whichever method you use for a particular disposal, keep clear records showing how you identified the shares sold.

ETFs and your cost base

If you hold ETFs, it's worth knowing that annual AMMA (Attribution Managed Investment Trust Member Annual) statements can adjust your cost base — for example, where a distribution includes a "tax-deferred" component. This means your ETF cost base isn't always simply what you originally paid; it can shift slightly over time based on the fund's distributions. If dividend income and cost base tracking matter to you, it's worth reviewing the distribution statements for the ETFs you hold each year. 

If you participate in a dividend or distribution reinvestment plan (DRP), each reinvested amount generally becomes a new parcel with its own acquisition date and cost base. 

It's also worth understanding franking credits alongside CGT, since both affect your overall after-tax return on Australian shares — see our guide on how franking credits work for the other half of the picture.

Reporting CGT on your tax return

You report your net capital gain (after applying any discount and offsetting losses) in the capital gains section of your tax return. Good record-keeping across the year — purchase dates, prices, brokerage, and sale details — makes this far easier at tax time, whether you lodge yourself or through a registered tax agent.

This is one reason it helps to invest through a platform that gives you clear, accessible statements. When you open a Selfwealth account, your trade history and portfolio records are available any time you need them for tax purposes.

Big changes coming: the 2026–27 Budget CGT reform

Important: the following is proposed legislation and is not yet law. In the 2026–27 Federal Budget (12 May 2026), the government announced a significant overhaul of CGT, and on 28 May 2026 introduced draft legislation to Parliament to implement it. If passed as currently drafted, from 1 July 2027:

• The 50% CGT discount would be replaced with cost base indexation (adjusting your cost base for inflation, similar to the system that applied before 1999) for individuals, trusts and partnerships.

• A 30% minimum tax would apply to real (inflation-adjusted) capital gains.

• The changes would generally apply to gains arising on or after 1 July 2027 — gains that accrue before that date would still generally be taxed under today's 50% discount rules, with transitional/apportionment arrangements for assets that straddle both periods.

• Some previously CGT-exempt "pre-CGT" assets would also be brought into the regime for gains accruing after the change.

Because several technical details (including exactly how apportionment and losses will interact with the new rules) are still subject to consultation and may change before the legislation passes, this section will need updating as the Bill progresses. If you hold shares for the long term and this reform could materially affect your plans, it's worth discussing timing and strategy with a registered tax agent or licensed financial adviser rather than acting on general commentary — including this article.

Common mistakes beginners make

• Forgetting brokerage and other costs when calculating the cost base, which overstates your gain.

• Not tracking the 12-month holding period accurately — remember, the clock starts the day after you acquire the shares.

• Assuming capital losses can offset salary or wages — they can only offset capital gains.

• Not keeping purchase records for each parcel, which makes reporting difficult, especially with multiple buys of the same stock over time.

• Overlooking AMMA cost base adjustments for ETF holdings.

Getting started

Understanding CGT is a key part of investing with your eyes open — but it shouldn't put you off getting started. If you're ready to begin building a portfolio of ASX or international shares, you can open a Selfwealth account online in around 15 minutes, with flat $9.50 brokerage and no account-keeping fees, and access to your trade history whenever you need it.

Frequently asked questions

Is capital gains tax a separate tax in Australia? 

No. CGT isn't a standalone tax — a capital gain is added to your other assessable income for the year and taxed at your marginal tax rate.

How long do I need to hold shares to get the CGT discount? 

Under the current rules, Australian resident individuals and trusts generally need to hold shares for more than 12 months (starting the day after acquisition) to access the 50% CGT discount.

Can I offset a capital loss against my salary? 

No. Capital losses can only be used to offset capital gains — they can't reduce tax on ordinary income like wages or salary. Unused losses can be carried forward to future years.

Will the 50% CGT discount be scrapped? 

As of mid-2026, the government has introduced draft legislation proposing to replace the 50% discount with cost base indexation and a 30% minimum tax from 1 July 2027. This is not yet law, and details may change as the Bill progresses through Parliament.

Do I pay CGT on shares held in an SMSF? 

SMSFs are subject to their own CGT rules, and the tax treatment can differ significantly depending on whether the fund is in accumulation or pension phase. This is worth discussing with your fund's accountant or a licensed adviser, since every SMSF's situation is different.

What records do I need to keep for CGT purposes? 

Generally, you should keep records of purchase date, purchase price, brokerage paid, sale date, sale price, and brokerage on the sale for each parcel of shares you hold.