Capital gains tax (CGT) applies in Australia when you sell shares, an investment property or other asset at a profit. CGT doesn't apply to most personal property and items, such as your car or family home.
When you own an asset for 12 months or longer, you are entitled to a 50% discount off any capital gains tax you owe.
You can use Finder's simple capital gains tax calculator to estimate your capital gain (or loss). This will help you understand your CGT obligations, but please keep in mind it's just an estimate.
Finder's capital gains tax calculator
The capital gains Tax (CGT) is calculated by first determining if there is a capital gain, which is calculated by subtracting the purchase price of the asset, the purchase costs and the sale costs from the sale price of the asset. If there is a capital gain, the individual's total tax payable is then calculated by applying their marginal tax rate for the current financial year to their total taxable income including the capital gain (which may include a discount if held for over 12 months). The figure provided by the calculator relates to the portion of tax payable as a result of the capital gain.
Assumptions and limitations
The calculator assumes the following:
the individual is a permanent resident of Australia for the entire current financial year
the asset:
was purchased after 21 September 1991
is owned by the individual and not a business entity
is not an owner-occupied home
is not part of a super fund
is not otherwise exempt from the CGT rules
the Medicare Levy Surcharge rate is not payable.
Disclaimer: The information provided by this calculator is only intended to provide an approximate estimate of the CGT you may need to pay. It is general in nature and does not constitute professional advice. The rules relating to CGT are complex and you should always seek professional advice in relation to your particular circumstances.
How to use the capital gains tax calculator
First you need to state whether you've owned the asset for more than 12 months (a yes or no question). If you've owned the asset for more than 12 months a 50% capital gains tax discount applies, effectively halving your tax payable.
Then you enter the purchase price (the price you paid for the asset) and then the price you sold it for.
Last, enter your taxable income for the current year. That's your income before tax.
Here's a simple example:
You've owned an asset for five years (select yes for the first question). The 50% discount now applies.
You bought the asset for $700,000.
You sold it for $900,000
Your taxable income is $85,000 a year.
Your capital gain (profit) is $200,000.
Your taxable capital gain with the 50% discount applied is $100,000.
Your estimated capital gains tax obligation is $37,175.
That's just a simple estimate. You can click "How this calculator works" for more information about the assumptions built into the capital gains tax calculator.
Income tax and capital gains
Capital gains tax is not actually a separate tax charged on top of your income tax. Instead, the capital gain is added to your taxable income. This is why the calculator asks for your taxable income.
Aa large capital gain can push you into a higher tax bracket.
In the example above, if you earned $85,000 a year before tax your marginal tax rate is 32.5%. But when you add the $100,000 of taxable capital gains from the asset sale, this puts your income at $185,000. That puts you in Australia's highest marginal tax bracket with a rate of 45%.
Luckily, if the asset you're selling is an investment property you can reduce your capital gains tax further by subtracting certain costs. More on that below.
How do you calculate capital gains tax on an investment property?
When selling an investment property you are able to deduct the costs of buying the property that weren't deductible on your annual tax return, like stamp duty and renovations. The total of your purchase price plus expenses you haven't deducted before is called your cost base.
Here's a simple example:
You purchase an investment property for $500,000 and sell it for $750,000 six years later.
You paid $25,000 in stamp duty and other costs, and spent $15,000 in renovations to the property.
This $40,000 is added to the purchase price.
Your cost base is now $540,000. Subtracting this from the sale price gives you a capital gain of $210,000.
Applying the 50% discount gives you a taxable capital gain of $105,000. This amount is added to your income when you file your tax return that year.
You can continue to claim any ownership expenses on your tax return in that financial year as well, such as mortgage interest payments, and you'll need to declare rental income too.
As you can see, CGT and property tax can be complicated, which is why keeping clear tax records for every year you've owned an asset is so important.
How can you reduce your capital gains tax?
There are 2 ways to approach a CGT reduction. You can try to reduce your CGT bill on the asset itself or you can try to minimise your overall taxable income (since your capital gain is simply added to your overall taxable income).
Here are some tips:
Do you qualify for an exemption? Remember that you don't have to pay capital gains tax on your home. You can only claim this "principal place of residence" exemption on one place at a time.
Can you increase your cost base? The more you spend to maintain the property, the less CGT you pay. You subtract your cost base from the selling price when you determine your capital gain. Obviously you don't want to spend more on the property just to reduce your tax bill. But you should definitely keep detailed records of every single property cost that you can add into your cost base (for example, your stamp duty and legal costs to purchase the property are part of your cost base).
Hold the asset for 12 months. If the asset in question is an investment property, waiting at least 12 months before selling is a no-brainer. You will get a 50% discount on your CGT.
Time the sale. If you know that your income will be lower next financial year, it might be worth timing the sale of the asset when your income is lowest, thereby reducing your total taxable income.
Get an accountant. Above all, get expert help from a tax professional.
What is the 6 year rule for CGT?
Your main residence is exempt from CGT. If you move out of your own home and turn it into an investment property, and you then sell that property, you'll need to pay CGT on part of the profit – for the period that the property was producing an income.
However, for CGT purposes, you can continue treating a property as your main residence for up to 6 years if you used it to produce a rental income, known as the '6-year rule'; and indefinitely if you didn't rent it out or produce income.
During that 6-year period, you can't treat any other property as your main residence, except for a 6 month transitional period if you are moving house. Learn more about the 6-year rule from the ATO.
How does a capital loss affect you?
It's also possible to make a capital loss. This is where you sell the asset for less than you paid for it, after your costs to maintain the asset are taken into consideration. With a capital loss you obviously don't have to pay any capital gains tax because there is no profit.
There is an upside though. You can use a capital loss to offset future capital gains. Let's say you sold an asset for $20,000 less than the cost base three years ago. Then this year you sold another asset for a capital gain of $50,000. You can subtract the $20,000 loss from the gain and reduce your capital gain to $30,000.
There is no time limit on when you can use a capital loss to offset a gain. But you need to have detailed records to show you have made a capital loss in order to claim it.
How is CGT calculated for shares and super?
When a super fund sells an investment asset and makes a capital gain it is liable for capital gains tax. But this doesn't directly affect an ordinary person with a super fund. The fund itself takes care of this.
Self-managed super funds (SMSFs) also have to pay CGT. As with property, if you own an asset through an SMSF for more than 12 months there is a discount. With super the discount is a 33.3% rather 50%.
Capital gains tax also comes into effect when you sell shares. It works the same as with property. There's a 50% discount if you owned the shares for more than 12 months before disposing of them. If you make a capital loss you can use it to reduce future capital gains.
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Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
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Hi, I have question with regards to CGT on Shares. Example
* Held over 12months
* Total Purchase $2.0m
* Total Sale = $2.4m
– Question – is a loss carried forward from prior year eg $150k taken off the $400k profit before the 50% discount is applied.
$400k – $150k loss = $250k gain
– 50% discount. = $125k
Individual tax rate 37% = $46,250 in tax payable?
OR is it
$400k net gain
– 50% discount (held over 12months) = $200k
– $150k loss carried forward = $50k gain
$50k @ 37% individual tax rate = $18,500
Quite a difference that I cant seem to confirm online anywhere even ATO
Many thanks
We’re not licenced to give personal taxation advice, so can’t advise on the specifics of your example. However the ATO states that if you have any capital losses from other assets, you must subtract these from your capital gains BEFORE applying the discount. If you are entitled to the discount for an asset, you reduce the remaining capital gain on that asset by 50% and report this amount in your income tax return.
Hi Paul, when you say you never rented it, do you mean you lived in it the entire time? If it was your principal place of residence, you do not need to pay CGT. If it was not your PPOR, you can enter your information in the calculator and it will give you an estimate. The amount of tax you pay will depend on your current income, as it’s added to your taxable income in the year that you sell.
If I no longer have any taxable income and yet I sell my shares which were bought $12 each but these sell for $39 each and I have held these for 10 years would I still be required to pay cgt?
Hi I sold my business last year I have owned for 30years I am in partner ship with my wife $100000 I went back to to work part time do I have to may capital gain taxes on my half I am 63 years old
We’re not authorised to provide personal financial or taxation advice, however we note that generally, CGT is payable when an asset is sold. How much is owing depends on the ownership structure and a number of other factors.
Given the complexity of your situation, we recommend you engage an accountant to assist with your tax return this year. They can help you manage your tax obligations, and take advantage of any tax deductions to help minimise tax payable. Note that their fees are tax deductible as well.
You can gift it your son by drawing up a contract and having him sign it. I suggest engaging a conveyancer to do this so it’s all legal and clear. If you’ve lived in the house as your main residence for 12 months you likely won’t have to pay CGT.
Your son will have to pay stamp duty on the property based on the market value (sounds like that’s $1,000,000 in this case). This is the case even if you gift it to him for free. But again, I’d suggest getting expert advice from a conveyancer.
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Hi, I have question with regards to CGT on Shares. Example
* Held over 12months
* Total Purchase $2.0m
* Total Sale = $2.4m
– Question – is a loss carried forward from prior year eg $150k taken off the $400k profit before the 50% discount is applied.
$400k – $150k loss = $250k gain
– 50% discount. = $125k
Individual tax rate 37% = $46,250 in tax payable?
OR is it
$400k net gain
– 50% discount (held over 12months) = $200k
– $150k loss carried forward = $50k gain
$50k @ 37% individual tax rate = $18,500
Quite a difference that I cant seem to confirm online anywhere even ATO
Many thanks
Hi Stevo,
We’re not licenced to give personal taxation advice, so can’t advise on the specifics of your example. However the ATO states that if you have any capital losses from other assets, you must subtract these from your capital gains BEFORE applying the discount. If you are entitled to the discount for an asset, you reduce the remaining capital gain on that asset by 50% and report this amount in your income tax return.
Hope this helps!
I bought a property for $123K 25 years ago, never rented it, and expect to sell for $750, What would be CGT?
Hi Paul, when you say you never rented it, do you mean you lived in it the entire time? If it was your principal place of residence, you do not need to pay CGT. If it was not your PPOR, you can enter your information in the calculator and it will give you an estimate. The amount of tax you pay will depend on your current income, as it’s added to your taxable income in the year that you sell.
Hope this helps.
If I no longer have any taxable income and yet I sell my shares which were bought $12 each but these sell for $39 each and I have held these for 10 years would I still be required to pay cgt?
Hi Ash,
When you make a capital gain on an asset, as you’ve described, you are liable to pay capital gains tax.
As you’ve owned your shares assets for longer than 12 months, you’ll also be entitled to a 50% discount on any tax payable.
Your CGT liability is added to your taxable income, and your tax is calculated based on the total amount gained.
Hope this helps!
Hi I sold my business last year I have owned for 30years I am in partner ship with my wife $100000 I went back to to work part time do I have to may capital gain taxes on my half I am 63 years old
Hi there,
We’re not authorised to provide personal financial or taxation advice, however we note that generally, CGT is payable when an asset is sold. How much is owing depends on the ownership structure and a number of other factors.
Given the complexity of your situation, we recommend you engage an accountant to assist with your tax return this year. They can help you manage your tax obligations, and take advantage of any tax deductions to help minimise tax payable. Note that their fees are tax deductible as well.
Hope this helps!
How do i gift a property to my son when I have inherited it one year ago?
How much would it cost me the house is worth $1000000
You can gift it your son by drawing up a contract and having him sign it. I suggest engaging a conveyancer to do this so it’s all legal and clear. If you’ve lived in the house as your main residence for 12 months you likely won’t have to pay CGT.
Your son will have to pay stamp duty on the property based on the market value (sounds like that’s $1,000,000 in this case). This is the case even if you gift it to him for free. But again, I’d suggest getting expert advice from a conveyancer.
All the best,
Richard