Capital Gains Tax (CGT) in Australia: What Investors Need to Know

Australia's CGT system is distinctive. The net capital gain (sale price minus cost base including brokerage) is added to your taxable income for the financial year. If you held the asset for more than 12 months before selling, you receive a 50% discount — only half the gain is added to your income. This is one of the most generous CGT regimes among developed nations.

Practical example: you buy $20,000 of VGS and sell it three years later for $30,000. Your capital gain is $10,000. With the 50% discount, only $5,000 is added to your taxable income. If your marginal rate is 30%, you pay $1,500 in CGT. Had you sold before 12 months, the full $10,000 would be taxable — costing $3,000.

Inside super, CGT is even more favourable. Accumulation phase: gains on assets held over 12 months are taxed at just 10% (a one-third discount applied to the 15% super tax rate). In pension phase: capital gains are completely tax-free. This makes super an incredibly tax-efficient vehicle for long-term investing.

Tax-loss harvesting is a useful strategy. If you hold some investments at a loss, you can sell them before 30 June to crystallise the loss and offset it against capital gains elsewhere — reducing your overall tax liability. Be mindful of the wash sale rule: the ATO may deny the loss if you buy back a substantially similar asset shortly after selling.

The main residence exemption means your family home is CGT-free when you sell it. However, investment properties, shares, ETFs, and crypto are all subject to CGT. Planning the timing of asset sales around the financial year and the 12-month discount threshold can save significant tax.