Capital gains tax in Australia

Is capital gains tax a separate tax in Australia?

No. Australia does not impose a standalone capital gains tax. Under the Income Tax Assessment Act 1997 (ITAA 1997), net capital gains for the income year are added to a taxpayer's assessable income and taxed at the same marginal income-tax rates that apply to salary, business profit, and other ordinary income. For Australian residents in 2024-25 those marginal rates are 0% (up to AUD 18,200), 16%, 30%, 37%, and 45% on income above AUD 190,000. The 2% Medicare Levy is calculated separately and applies on top of the marginal rate, so the effective maximum rate on a large capital gain is 47%. [SC1]

How is a capital gain calculated?

The basic calculation under Division 102 ITAA 1997 is: capital proceeds minus the cost base equals the gross capital gain. Capital proceeds are ordinarily the sale price; market-value substitution rules apply in non-arm's-length transactions. The cost base (section 110-25) has five elements: (1) acquisition cost; (2) incidental costs such as stamp duty, legal fees, and agent commissions; (3) non-deductible ownership costs such as interest, rates, and maintenance incurred after 20 August 1991; (4) capital expenditure to increase or preserve the asset's value; and (5) costs to preserve or defend title. For assets acquired before 21 September 1999, taxpayers may choose the indexation method instead of the 50% discount -- indexation adjusts elements one, two, four, and five of the cost base by CPI growth to the September 1999 quarter (the CPI was frozen at that point under the 1999 reforms). The choice is made asset-by-asset: whichever method produces the lower gain prevails. Capital losses are quarantined -- they can only reduce capital gains, never ordinary income, but they carry forward indefinitely. Losses are applied against gross gains before the 50% discount is applied. [SC1][SC2]

What CGT events trigger a liability?

The legislation defines more than 50 distinct CGT events in Division 104. The most common is CGT event A1 -- disposal of a CGT asset, the date of which is the date of the contract, not the settlement date. Other significant events include: B1 (use and enjoyment before title passes); C1 and C2 (loss or destruction of an asset, or cancellation of a right or convertible interest); D1 (granting an option); F1 (granting a long-term lease); H2 (receiving insurance or indemnity proceeds); I1 and I2 (assets held when an individual stops being an Australian resident). Pre-CGT assets -- those acquired before 20 September 1985 -- are generally exempt unless converted by a subsequent event. Personal-use assets are also exempt where the cost base was AUD 10,000 or less. [SC3]

Who qualifies for the 50% CGT discount?

Division 115 ITAA 1997 provides a 50% discount on the net capital gain where an asset has been held for more than 12 months. Eligible entities are: Australian-resident individuals, and trusts (distributions to individual beneficiaries receive the 50% discount; distributions to corporate beneficiaries do not). Complying superannuation funds receive a 33.33% discount rather than 50%. Companies receive no discount whatsoever -- a capital gain made by a company is fully included in assessable income at the corporate rate (25% for base-rate entities; 30% otherwise). Non-resident individuals cannot claim the 50% discount on any portion of a gain that accrued during a period of non-residency. [SC4]

Example (AUD figures): An Australian-resident individual sells an investment property for AUD 900,000. The cost base (purchase price plus costs plus improvements) is AUD 550,000. Gross capital gain: AUD 350,000. After 50% discount: AUD 175,000 is added to other assessable income. If total taxable income reaches AUD 300,000, the AUD 175,000 CGT component is taxed at 45% plus 2% Medicare Levy = AUD 82,250 in tax on the discounted gain.

What is the main-residence exemption and the 6-year absence rule?

Section 118-110 ITAA 1997 fully exempts from CGT a gain on disposal of a dwelling that was the taxpayer's main residence for the entire ownership period and was used solely for private purposes. A partial exemption applies where the dwelling was a main residence for only part of the period or was partly income-producing. Under section 118-145 -- the six-year absence rule -- a taxpayer who moves out but retains ownership can continue treating the dwelling as a main residence for up to six years while it is rented out. The six-year clock resets each time the owner moves back in as their main residence. If the property is not rented out, the absence may be indefinite. The taxpayer cannot concurrently treat any other dwelling as a main residence during this period (except a six-month overlap when moving between residences under section 118-140). [SC5]

How does the foreign-resident exemption removal affect expats?

The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 removed the main-residence exemption for foreign residents with effect from 30 June 2020. A taxpayer who is a foreign resident for tax purposes at the time of disposal cannot claim the exemption, regardless of how long the property was previously their main residence while they were a resident. A transitional window allowed pre-7:30 pm AEST 9 May 2017 property owners to still claim the exemption on disposals on or before 30 June 2020. A narrow life-events exception survives: a foreign resident who has been non-resident for six years or fewer may still access the exemption if, during that period, they, their spouse, or a child under 18 suffered a terminal illness, died, or experienced a marriage or de-facto breakdown. Note that the definition of foreign resident for this rule encompasses Australian citizens and permanent residents who are non-resident for tax purposes, not only foreign nationals. [SC5][SC6]

Separately, from 1 January 2025 the Foreign Resident Capital Gains Withholding (FRCGW) rate increased from 12.5% to 15% and the AUD 750,000 threshold was removed entirely, meaning all Australian real property disposals by foreign residents are subject to withholding regardless of sale price. FRCGW is a payment-on-account against the vendor's actual tax liability, not a separate tax. [SC6]

What small-business CGT concessions are available?

Subdivision 152 ITAA 1997 provides four concessions for disposals of active business assets where the taxpayer satisfies one of two gateway tests: (a) aggregated annual turnover under AUD 2 million; or (b) net asset value of the entity and its affiliates and connected entities does not exceed AUD 6 million just before the CGT event. The concessions may be stacked: [SC7]

• 15-year exemption (section 152-105): The entire capital gain is disregarded where the CGT asset has been continuously owned for at least 15 years, the owner is 55 or older at the time of the CGT event, and the disposal is in connection with retirement or permanent incapacity.
• 50% active asset reduction (section 152-205): A 50% reduction of the gain after first applying the standard individual 50% discount. The combined effect for an eligible individual is a 75% reduction of the underlying gross gain.
• Retirement exemption (section 152-305): Up to AUD 500,000 of capital gain per individual (lifetime cap) may be disregarded. For a taxpayer under 55 at the time of the election, the exempt amount must be contributed to a superannuation fund.
• Small-business rollover (section 152-410): All or part of a capital gain may be deferred by acquiring a replacement active asset or improving an existing active asset within two years of the CGT event.

For the broader context of business exits and restructuring, see the Australia country overview and consult a qualified tax professional for eligibility assessment before relying on any concession.

Capital gains tax in Australia involves interconnected rules -- the 50% discount, main-residence exemption, foreign-resident rules, cost-base composition, CGT events, and small-business concessions all interact. This page summarises the law as at June 2026 for general information purposes only. Rules and thresholds change: the 2024-25 Stage 3 tax cuts restructured the income brackets that determine how much of a capital gain is taxed, and the 2025 FRCGW changes affect every conveyance by a foreign resident. Engage a qualified tax professional registered with the Tax Practitioners Board for advice specific to your circumstances.