AU Capital Gains

Section 1 — Quick Reference

Section 1 — Quick Reference

Field	Value
Country	Australia
Tax year	1 July 2024 – 30 June 2025
CGT rate	No separate rate — net capital gain added to taxable income, taxed at marginal rate
Effective max rate	~23.25% (47% marginal × 50% discount, for assets held >12 months)
50% general discount	Yes — assets held >12 months by individuals and trusts
Annual exemption	None (unlike UK)
Primary legislation	ITAA 1997, Parts 3-1 and 3-3
Tax authority	Australian Taxation Office (ato.gov.au)
Form	Schedule 3 attached to Individual Tax Return (ITR)
Verified by	Pending — Australian CPA/CA sign-off required

Section 2 — What Triggers CGT

CGT applies when a CGT event occurs. The most common:

CGT Events

Event	What it is
A1	Disposal of a CGT asset (sale, gift, transfer)
B1	Use and enjoyment before title passes
C1	Loss/destruction of asset
C2	Cancellation, surrender, expiry of a right/option
D1	Creation of contractual/statutory rights over asset
G1	Return of capital exceeding cost base

• CGT assets — shares, units, land, buildings, goodwill, rights, options, crypto assets, foreign currency (above threshold)
• Exempt assets — main residence (principal private residence, PPR), motor vehicles, personal-use assets acquired for <$10,000, certain compensation amounts

Section 3 — Capital Gain Calculation

• Capital gain formula — Capital gain = Capital proceeds − Cost base
• Cost base (5 elements) — 1. Original acquisition cost 2. Incidental acquisition costs (stamp duty, legal fees, brokerage) 3. Non-deductible ownership costs (e.g. rates, insurance on investment property) 4. Capital expenditure to increase/preserve value 5. Incidental disposal costs (agent fees, legal fees)
• Reduced cost base — used to calculate capital losses = elements 1, 2, 4, 5 only (not 3)
• Capital loss treatment — Capital loss: if proceeds < reduced cost base. Losses can only be offset against capital gains (not other income). Unused losses carry forward indefinitely.

Section 4 — The 50% General Discount

• 50% general discount eligibility — If an individual (or trust) holds a CGT asset for more than 12 months before disposal, only 50% of the capital gain is included in taxable income.
• Discounted capital gain formula — Discounted capital gain = Capital gain × 50%
• 12-month clock — The 12-month clock starts the day AFTER acquisition and ends on the day of disposal
• Discount mechanics — The discount reduces the gain, not the tax rate
• Order of application — Discount is applied AFTER offsetting capital losses
• Companies exclusion — Does NOT apply to companies (companies pay 30% or 25% on full gain)
• Non-residents exclusion — Does NOT apply to non-residents (since 8 May 2012)

Section 5 — Small Business CGT Concessions (SBCGT)

Four concessions apply if the taxpayer satisfies the basic conditions:

• Basic conditions — 1. Net assets do not exceed $6 million (including related party assets), OR 2. Aggregated turnover < $2 million (small business entity) 3. Asset is an active asset: used in the business for at least half the ownership period (or 7.5 years if held >15 years)

The four concessions (can be combined):

The four concessions

Concession	What it does	Conditions
15-year exemption	Entire gain exempt from CGT	Asset held ≥15 years + taxpayer aged ≥55 and retiring, or permanently incapacitated
50% active asset reduction	Reduce capital gain by 50%	Basic conditions only
Retirement exemption	Exempt up to $500,000 lifetime	Must be contributed to super if under 55
Small business rollover	Defer gain up to 2 years	Must acquire replacement asset or incur capex within 2 years

• Stacking concessions — Stacking concessions: 50% discount → 50% active asset reduction → retirement/rollover can apply to the remaining amount. Effective rate on a large gain can approach zero if all concessions apply.

Section 6 — Main Residence (PPR) Exemption

• Main residence exemption — A dwelling that is the taxpayer's main residence throughout ownership is fully CGT-exempt.
• Partial exemptions apply when — - Dwelling used for income-producing purposes for part of ownership - Dwelling was not main residence for part of the period (e.g. rented out) - Adjacent land exceeds 2 hectares
• 6-year absence rule — If you move out but do not nominate another property as main residence, you can treat the dwelling as your main residence for up to 6 years (while renting it out). Resets each time you move back in.

Section 7 — CGT and Foreign Assets

• Worldwide gains taxed — Australian tax residents are taxed on worldwide capital gains, including gains on: - Foreign shares - Foreign real property - Foreign businesses
• Foreign tax credits — Foreign tax credits available for foreign CGT paid on the same gain (Form IT 1205 / Schedule 25A).
• Exit CGT — When you cease to be an Australian tax resident, you are treated as having disposed of most CGT assets at market value on the day before you stop being a resident. Exception: taxable Australian property (TAP) — no deemed disposal, but AU retains taxing rights when actually sold.

Section 8 — Sources

• ITAA 1997 Part 3-1 (CGT events), Part 3-3 (CGT concessions), Div 152 (SBCGT)
• ATO: ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax
• ATO CGT Guide 2025

Working paper only — not a filed return. Have a qualified Australian CPA/CA review before filing. SBCGT eligibility requires detailed analysis of the active asset test and aggregated turnover.