There Is No “Capital Gains Tax Rate”
This is the single most common misconception about CGT, and it is worth stating plainly. The ATO’s own words: “Although it is referred to as ‘capital gains tax’, it’s part of your income tax. It’s not a separate tax.”
There is no separate rate, no separate return and no separate bill. Your net capital gain is added to your taxable income for the year, and the whole lot is taxed on the ordinary marginal rate scale. That means the same gain costs different people wildly different amounts.
Here is the same $100,000 gain on an asset held more than 12 months, for four people who differ only in their salary:
| Other income | Net capital gain | Marginal rate | Tax on the gain | Effective rate |
|---|---|---|---|---|
| $60,000 | $50,000 | 30% | $16,000 | 16.0% |
| $100,000 | $50,000 | 37% | $17,050 | 17.1% |
| $160,000 | $50,000 | 45% | $21,100 | 21.1% |
| $250,000 | $50,000 | 45% | $23,500 | 23.5% |
Identical $100,000 gain, 2026-27 rates, including the 2% Medicare levy. Effective rate is tax as a share of the full gain before the discount.
The “effective rate” column is the closest thing to a CGT rate that exists — and as you can see, it is an outcome, not a published figure. It moves with your income, and a gain large enough to push you into a higher bracket is partly taxed at that higher rate.
How CGT Is Actually Calculated
The ATO sets out eight steps. The calculator above follows them exactly, and the order matters more than people expect:
- Work out your capital proceeds — what you received.
- Work out your cost base — what the asset cost you to buy, hold and sell.
- Subtract the cost base from the proceeds. Above zero is a gain, below zero is a loss.
- Repeat for every CGT event in the year.
- Subtract your capital losses — carried-forward losses first.
- Check whether you are left with a net gain or a net loss.
- Apply the 50% discount to whatever remains that is eligible.
- Report the net capital gain and pay tax on it at your marginal rate.
Losses come off before the discount, not after. This is step 5 before step 7, and reversing them is the most common error in third-party CGT calculators. It always understates the tax — see the worked example below, where getting the order wrong hides $2,250 of gain.
Worked Example: The ATO’s Investment Property
The ATO’s own example. Rhi buys an investment property for $500,000 and sells it five years later for $600,000:
| Capital proceeds | $600,000 |
| Cost base — $500,000 purchase, $15,000 stamp duty, $1,200 conveyancing, $1,300 conveyancing on sale, $12,500 agent’s commission | −$530,000 |
| Capital gain | $70,000 |
| 50% CGT discount | −$35,000 |
| Net capital gain reported | $35,000 |
Now add a second asset. In the same year Rhi also sells shares that cost $10,000 for $5,500, a capital loss of $4,500:
| Capital gain on the property | $70,000 |
| Capital loss on the shares — applied first | −$4,500 |
| Gain after losses | $65,500 |
| 50% CGT discount | −$32,750 |
| Net capital gain reported | $32,750 |
Discount first, then losses, would give $30,500 — understating the gain by $2,250.
The 12-Month 50% CGT Discount
If you are an Australian resident for tax purposes and you owned the asset for at least 12 months before the CGT event, you halve the remaining gain. Two details decide whether you actually qualify:
- You exclude both end days. The day you acquired the asset and the day of the CGT event do not count toward the 12 months.
- For a contract sale, the CGT event is the contract date — not settlement. Property sales usually work this way, and it also decides which financial year the gain falls in.
There is no partial discount. Eleven months and 29 days gets you nothing; the discount is all or nothing.
The discount is not the same for everyone
| Who owns the asset | CGT discount |
|---|---|
| Individual | 50% |
| Australian trust | 50% |
| Complying super fund | 33.33% |
| Company | No discount |
ATO, CGT discount (QC66019).
Companies cannot use the CGT discount at all, no matter how long they held the asset. That is one reason holding an appreciating asset inside a company is often less tax-effective than holding it personally.
Two other cases change the answer. Providing affordable rental housing can add up to 10%, lifting the discount to as much as 60%. And for assets acquired before 21 September 1999 you may instead index the cost base for inflation — but you cannot use both indexation and the discount.
What Goes in the Cost Base
Your cost base is not just the purchase price. Getting it right is the single biggest lever you have over the gain, because every legitimate dollar you add is a dollar you are not taxed on. The ATO builds it from five elements:
1. Money paid or property given for the asset
The money you paid (or are required to pay) for the asset, plus the market value of any property you gave to acquire it.
Purchase price · Market value of property exchanged
2. Incidental costs of acquiring the asset or of the CGT event
Ten specific incidental costs, incurred either when you acquired the asset or when you disposed of it.
Stamp duty · Conveyancing and legal fees · Agent's commission on sale · Surveyor, valuer, auctioneer, accountant or broker fees · Advertising or marketing to find a buyer or seller · Borrowing expenses such as loan application and mortgage discharge fees · Search fees and the cost of a conveyancing kit
3. Costs of owning the asset
Holding costs — but only where you could not claim them as a deduction. You cannot use these to work out a capital loss, and they do not apply to assets acquired before 21 August 1991.
Rates and land tax · Insurance premiums · Repairs · Non-deductible interest on money borrowed to acquire the asset
4. Capital costs to increase or preserve the asset's value
Capital expenditure to increase or preserve the asset's value, or to install or move it. Goodwill is excluded.
Capital improvements and extensions · Costs of applying for zoning changes
5. Capital costs of preserving or defending your title
Capital expenditure to preserve or defend your ownership of, or rights to, the asset.
Legal costs of defending title · Paying a call on shares
What you must leave out
The governing rule is simple: you cannot include anything you have claimed, or could claim, as a tax deduction. Double-dipping is the mistake the ATO looks for.
- Any cost you can claim as a tax deduction — including capital works deductions, which reduce the cost base rather than adding to it
- GST net input tax credits, if you are registered for GST
- Expenditure you later recouped, such as an insurance payout or an amount paid by someone else, unless you included it in assessable income
- Heritage conservation expenditure, and land care or water facility spending that gave rise to a tax offset, for assets acquired after 13 May 1997
- Any part of an expense not attributable to acquiring the asset
Capital works deductions deserve special attention. If you claimed depreciation on the building, those deductions reduce your cost base rather than adding to it — which increases your gain. In the ATO’s example, a $100,000 cost base less $7,500 of capital works deductions leaves a reduced cost base of $92,500, turning a $10,000 apparent loss into a $2,500 one. See our tax deductions guide for what you can claim along the way.
One trap on the third element: holding costs like rates, land tax, insurance and interest only go in the cost base where they were not deductible. For a normal rental property you have already deducted them, so they cannot be counted again. They also cannot be used to create or increase a capital loss.
Is Your Home Exempt? Not Automatically
The main residence exemption is the most valuable concession in the CGT system, and the most widely misunderstood. It is not automatic. To get the full exemption, all three of these must hold:
- The dwelling has been the home of you, your partner and other dependants for the whole period you owned it
- It has not been used to produce income — you have not run a business from it, rented it out, or bought it to renovate and sell at a profit
- It is on land of 2 hectares or less
Fail any one of them and you fall back to a partial exemption, where part of the gain becomes assessable. The usual causes are renting out a room, running a business from home, or buying a place to renovate and flip. Being a foreign resident when the CGT event happens can remove the exemption entirely.
A dwelling is generally your main residence if you and your family live in it, your belongings are there, it is your mailing and electoral-roll address, and services are connected. Vacant land never qualifies — the property must have a dwelling on it and you must have lived in it.
The 6-year rule
When you move out, you can keep treating the property as your main residence:
- Indefinitely, if you do not use it to produce income — for example you leave it vacant or use it as a holiday house.
- For up to 6 years, if you do use it to produce income. This is the “6-year rule”.
While the choice applies you cannot treat any other property as your main residence, except for up to 6 months while you are moving house. Importantly, the 6 years applies to each separate period of absence — move back in, then leave again, and the clock restarts.
What happens if you exceed 6 years
You are taxed on the portion of the ownership period after the limit, and your cost base resets to the market value when you first used the home to produce income. The ATO’s worked example: an apartment sold for $555,000 with a deemed cost base of $220,000 plus $15,000 of selling fees gives a $320,000 gain. With 6,940 non-main-residence days out of 9,133 ownership days:
| Capital gain | $320,000 |
| × (6,940 non-main-residence days ÷ 9,133 ownership days) | $243,162 |
| After the 50% discount | $121,581 |
Note also that if you used part of your home to produce income before you moved out — say 25% as a consulting room — that same proportion of the gain stays assessable, both before and after you leave.
Capital Losses: What They Can and Cannot Do
A capital loss cannot reduce the tax on your salary. Losses offset capital gains only. If you are hoping a bad share year will cut your PAYG bill, it will not.
What losses can do:
- Offset capital gains in the same year.
- Carry forward indefinitely — there is no time limit — to offset future capital gains.
- Be applied selectively. You choose which gains to apply them to, and applying them to gains that are not discount-eligible first gives you the lowest tax.
Some losses are not usable at all. You cannot deduct losses on personal use assets such as boats and furniture, on CGT-exempt assets such as cars and motorcycles, or on low-value collectables. Losses on collectables can only ever offset gains on other collectables.
Which Assets Are Exempt
- Assets acquired before 20 September 1985 (pre-CGT assets)
- Your main residence, where you meet all the conditions
- Cars and motorcycles — a car being a vehicle carrying under 1 tonne and fewer than 9 passengers
- Depreciating assets used solely for taxable purposes, such as business equipment and items in a rental property
- Collectables acquired for $500 or less, and personal use assets acquired for $10,000 or less
- Eligible granny flat arrangements
- Compensation or damages for a wrong, injury or illness suffered by you or a relative
- Winnings or losses from gambling, a game, or a competition with prizes
Exemption cuts both ways: if an asset is exempt from CGT, you also cannot claim a capital loss on it. Assets acquired before 20 September 1985 are pre-CGT and exempt, though improvements made after that date can still be caught. Full list at the ATO.
Coming 1 July 2027: The Discount Changes
2026-27 is the last full income year of the 50% discount in its current form — but nothing on this page changes yet. The reform applies only to gains accruing on and after 1 July 2027.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received assent on 26 June 2026 (Act No. 49 of 2026). For capital gains accruing on and after 1 July 2027 it replaces the 50% discount for individuals, trusts and partnerships with:
- Cost base indexation for assets held more than 12 months, so you are taxed on the real gain after inflation rather than the nominal one; and
- a minimum tax rate of 30% on net capital gains.
It is not a clean switch-off. Assets are treated as deemed-disposed on 30 June 2027 and reacquired the next day, so a gain on an asset you already hold gets split across the two regimes and apportioned between them. That mechanic, rather than the headline rate, is what will make 2027-28 returns harder.
The 50% discount survives for:
- capital gains accrued before 1 July 2027
- eligible new residential dwellings, where the taxpayer opts for the discount instead of indexation
- certain entities and assets placed outside the reforms
And these are outside the new indexation regime entirely: companies, complying superannuation entities, life insurance companies, foreign residents, temporary residents.
We have not built the post-1 July 2027 regime into this calculator. The indexation factors and the apportionment method for gains straddling 1 July 2027 have not been published by the ATO yet, and we do not publish figures we cannot verify at source. Until they are, use this calculator for 2026-27 disposals and read the Act itself or the Parliamentary Library bills digest. Note the ATO’s own CGT pages still describe this as “announced in the 2026–27 Federal Budget”, which reads like a proposal — it is law, with a deferred start.
Related Calculators
- Income Tax Calculator — your full liability once the gain is included
- Australian Tax Brackets — the marginal rates the gain is taxed at
- Take-Home Pay Calculator — what lands in your account each pay
- Tax Deductions Guide — what you can claim along the way, and why it changes your cost base
- Tax Return Calculator — estimate your refund or bill
Frequently Asked Questions
Capital gains tax questions and answers
How much is capital gains tax in Australia?
There is no fixed amount and no separate capital gains tax rate. The ATO is explicit that although it is called capital gains tax, "it's part of your income tax. It's not a separate tax." Your net capital gain is added to your taxable income and taxed at your marginal rate, so two people making the identical gain pay very different amounts. If you owned the asset for at least 12 months you are generally taxed on only 50% of the gain. On a $165,000 gain with $100,000 of other income, $82,500 is added to taxable income and the tax and Medicare levy come to about $29,725.
What is the capital gains tax rate in Australia?
There isn't one. This is the most common misconception about CGT. The gain is taxed at whatever marginal rate applies once it is stacked on top of your other income, which for 2026-27 means anywhere from 0% to 45% plus the 2% Medicare levy. Because the 50% discount halves the taxable portion, the effective rate on the full gain for a top-bracket taxpayer works out at roughly 23.5% — but that is an outcome of the marginal rates, not a rate the ATO publishes.
How does the 50% CGT discount work?
If you are an Australian resident for tax purposes and you owned the asset for at least 12 months before the CGT event, you reduce the remaining capital gain by 50% and report only that half. Two details catch people out. First, you exclude both the day you acquired the asset and the day of the CGT event when counting the 12 months. Second, you must subtract any capital losses BEFORE applying the discount, not after — doing it the other way around understates your tax.
Do I pay capital gains tax if I sell within 12 months?
Yes, and you get no discount at all. The 50% discount is unavailable for any asset held less than 12 months, so the entire gain is added to your taxable income. There is no partial or pro-rata discount for holding an asset for eleven months. On the same $165,000 gain used above, selling early takes the tax from about $29,725 to about $67,900 — a difference of roughly $38,175 for the sake of the settlement date.
What can I include in the cost base?
The cost base has five elements: what you paid for the asset; incidental costs of buying or selling it such as stamp duty, conveyancing, legal fees and agent's commission; costs of owning it such as rates, land tax, insurance and non-deductible interest; capital costs that increase or preserve its value, such as improvements; and capital costs of defending your title. The critical exclusion is that you cannot include anything you have claimed or can claim as a tax deduction. Capital works deductions in particular reduce your cost base rather than adding to it, which increases your gain.
Is my home exempt from capital gains tax?
Not automatically. The full main residence exemption requires all three conditions to hold: the dwelling was the home of you and your dependants for the whole period you owned it, it was never used to produce income, and it sits on 2 hectares or less. If you rented out a room, ran a business from home, or bought it to renovate and resell, you fall to a partial exemption and part of the gain becomes assessable. Being a foreign resident when you sell can remove the exemption entirely.
What is the 6-year rule for capital gains tax?
If you move out of your home you can keep treating it as your main residence for CGT purposes — indefinitely if you leave it vacant or let a relative use it rent-free, but only for 6 years if you use it to produce income such as rent. While the choice applies you cannot treat any other property as your main residence, except for up to 6 months when you are moving house. The 6-year limit applies separately to each period of absence, so moving back in and later leaving again resets the clock.
Can capital losses reduce the tax on my salary?
No. Capital losses can only be offset against capital gains, never against ordinary income like wages. If your losses exceed your gains you have a net capital loss, which you carry forward to reduce capital gains in future years. There is no time limit on how long you can carry a net capital loss forward, and you apply carried-forward losses in the order you made them. Losses on collectables can only be used against gains on other collectables, and losses on personal use assets or CGT-exempt assets such as your car cannot be used at all.
Is the 50% CGT discount being abolished?
It is changing, but not yet. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received assent on 26 June 2026 (Act No. 49 of 2026). It replaces the 50% discount for individuals, trusts and partnerships with cost base indexation plus a minimum tax rate of 30%, for capital gains accruing on and after 1 July 2027. It does not apply to gains accruing before that date, so for the whole of the 2026-27 income year the 50% discount continues to apply exactly as this calculator applies it. The first affected year is 2027-28.
Do companies get the CGT discount?
No. Companies cannot use the CGT discount at all, however long they held the asset. Individuals and Australian trusts discount an eligible gain by 50%, and complying super funds by 33.33%. This is one reason holding an appreciating asset in a company is often less tax-effective than holding it personally, though there are many other considerations.
When does the CGT event happen — contract date or settlement?
For a sale under a contract, the CGT event happens on the date of the contract, not when the sale settles. Property sales usually work this way and the distinction decides which financial year the gain falls in. The ATO's own example: if contracts are exchanged on 4 June 2026 and settlement happens on 6 July 2026, the gain belongs in the return for the year ending 30 June 2026. If there is no contract of sale, the CGT event happens at the time of sale.
How is CGT calculated on shares?
Exactly the same way as on property. Your capital proceeds are what you sold the shares for; your cost base is what you paid plus brokerage and stamp duty on both the purchase and the sale. Subtract the cost base from the proceeds to get the gain, subtract any capital losses, then apply the discount if you held the shares at least 12 months. Because shares are usually bought in parcels at different times, you need to track each parcel separately — parcels bought at different times have different costs and different holding periods.
Do I get a bigger discount for affordable housing?
Yes. Australian-resident individuals who provide affordable rental housing to people on low to moderate incomes can qualify for an additional CGT discount of up to 10%, which lifts the total discount to as much as 60% on that residential rental property. Conditions apply about how long and through whom the housing is provided.
Which assets are exempt from capital gains tax?
Assets acquired before 20 September 1985 are pre-CGT and exempt. Your main residence is exempt if you meet all the conditions. Your car and motorcycle are exempt, as are depreciating assets used solely for taxable purposes, and collectables acquired for $500 or less. A personal use asset such as a boat or furniture is only subject to CGT if it cost more than $10,000. Note that exemption cuts both ways — if an asset is exempt from CGT you also cannot claim a capital loss on it.
How this calculator works▼
The method, the 50% discount, the five cost base elements and the loss rules come from the ATO’s How to calculate your CGT (QC104071), CGT discount (QC66019), Cost base of assets (QC66022) and Using capital losses (QC66025), all verified 28 July 2026. The main residence rules come from QC69710 and QC66030.
Tax on the gain is computed by adding the net capital gain to your other income and taking the difference in income tax and Medicare levy — it never applies a standalone CGT rate, because no such rate exists. It uses the 2026-27 resident brackets and the 2% Medicare levy. It does not model the Medicare levy surcharge, HECS-HELP repayments, other offsets, the indexation method for pre-21 September 1999 assets, small business CGT concessions, or the post-1 July 2027 regime. Every figure on this page is derived from a single constants file and checked against the ATO’s published worked examples — Rhi, Justin, Maree, Danuta, Roya and Helen — in automated tests.
This is general information, not personal tax advice. CGT on property and inherited assets gets complicated quickly; see a registered tax agent for your own position.
Sources & References
- 1What is capital gains tax? (QC69844)— Australian Taxation Office
- 2CGT discount (QC66019)— Australian Taxation Office
- 3How to calculate your CGT (QC104071)— Australian Taxation Office
- 4Cost base of assets (QC66022)— Australian Taxation Office
- 5Using capital losses to reduce capital gains (QC66025)— Australian Taxation Office
- 6Treating former home as main residence (QC66030)— Australian Taxation Office
- 7Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026)— Parliament of Australia
- 8Budget 2026-27 — Tax reform— Australian Government
Last verified: 28 July 2026. Our content is based on the latest information from official Australian government sources.
James Harrington
Verified AuthorSenior Tax & Payroll Analyst
CPA, Registered Tax Agent (25787011)
James is a CPA-qualified tax professional with over 14 years of experience in Australian taxation and payroll systems. He spent six years at the Australian Taxation Office working on PAYG withholding and individual tax return processing before moving into financial publishing. He now leads the tax content at Pay Calculator Australia, translating complex ATO legislation into clear, actionable guidance.
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