Capital Gains Tax Explained: What You Pay When You Sell

Short answer

Capital gains tax (CGT) is the tax you pay on the profit when you sell an investment — like shares, ETFs, an investment property, or crypto — for more than you paid for it. You're only taxed on the gain, not the whole sale price. And if you've held the asset for more than 12 months, you only pay tax on half the gain (the "50% CGT discount"). Your family home is usually exempt.

What is capital gains tax (CGT)?

CGT isn't a separate tax with its own rate — it's just part of your income tax. When you sell certain assets for a profit, the ATO treats that profit (your "capital gain") as part of your taxable income for the year, and you pay your normal marginal tax rate on it.

Assets that can trigger CGT include:

• Shares and ETFs
• Investment properties
• Crypto and other digital assets
• Managed funds
• Collectibles over a certain value (art, jewellery, coins)

Your family home is generally exempt, and so are personal items like your car. So for most families, CGT only becomes relevant when you invest.

How to work out your capital gain

The basic formula is simple:

Capital gain = sale price − cost base

Your "cost base" isn't just what you paid. It includes the little extras you can add:

• The purchase price
• Brokerage fees on buying and selling
• Stamp duty (for property)
• Some holding costs (for property)

A simple example

Let's say you bought $10,000 worth of an ETF, paid $40 in brokerage, and sold it 18 months later for $15,000:

You're taxed on $4,960 — not the $15,000 you sold for. That's the part many people get wrong.

The 50% CGT discount

If you're an individual (not a company) and you've held the asset for more than 12 months, you only pay tax on half the gain.

Using the example above:

• Full gain: $4,960
• Held more than 12 months → discounted gain = $2,480
• That $2,480 gets added to your taxable income

If your marginal tax rate is 30% (the bracket covering $45,001–$135,000 in 2025-26), you'd pay about $744 in tax on the gain — instead of $1,488 without the discount.

That's the big incentive to invest for the long term: the discount rewards patience.

How much tax will you actually pay?

CGT is added on top of your other income and taxed at your marginal rate. Here are the 2025-26 tax brackets (excluding the 2% Medicare levy):

So the amount of CGT you pay depends entirely on your total income for the year — a high earner pays more on the same gain than a low earner.

What about capital losses?

If you sell an investment for less than you paid, that's a capital loss. You can use it to reduce your capital gains in the same year, or carry it forward to offset future gains. But you can't use a capital loss to reduce your salary or other ordinary income.

This is worth knowing: if you've had a losing investment this year and a winning one you're thinking of selling, selling the loser before 30 June can reduce the tax on your gain.

Do you pay CGT on your home?

No. Your main residence is generally exempt from CGT — which is a big reason the family home remains such a tax-friendly way to build wealth. Investment properties, on the other hand, are fully subject to CGT when you sell.

Three tips to keep CGT simple

1. Keep records of your purchase price and brokerage fees. You'll need them to work out your cost base, sometimes years later.
2. Hold for more than 12 months if you can. The 50% discount is the single biggest CGT saving available to everyday investors.
3. Use losses wisely. If you have a losing investment, consider the timing of any sale to offset gains in the same year.

If you're investing regularly in ETFs and tracking every buy and sell, keeping your records organised through the year makes tax time far less painful — a tool like AusTax AI can help keep your records in one place.

If you're new to investing, start with our plain-English guide to ETFs or check out how franking credits work.

The bottom line: CGT only bites when you sell for a profit, it's only on the gain, and holding for more than 12 months halves what you owe. Invest for the long term and keep good records, and CGT becomes just another line on your return — not a scary surprise.