Australia Capital Gains Tax (Residents)

|---| | 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 |

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Section 2 — What Triggers CGT

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

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 include: 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.

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Section 3 — Capital Gain Calculation

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: if proceeds < reduced cost base. Losses can only be offset against capital gains (not other income). Unused losses carry forward indefinitely.

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Section 4 — The 50% General Discount

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 = Capital gain × 50%

• The 12-month clock starts the day AFTER acquisition and ends on the day of disposal
• The discount reduces the gain, not the tax rate
• Discount is applied AFTER offsetting capital losses
• Does NOT apply to companies (companies pay 30% or 25% on full gain)
• Does NOT apply to non-residents (since 8 May 2012)

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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):

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: 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.

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Section 6 — Main Residence (PPR) 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.

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Section 7 — CGT and Foreign Assets

Australian tax residents are taxed on worldwide capital gains, including gains on:

• Foreign shares
• Foreign real property
• Foreign businesses

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.

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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.