Capital Gains Tax Explained Simply

What Is Capital Gains Tax?

Capital Gains Tax (CGT) is the tax you pay on the profit when you sell (or dispose of) an asset. It's not a separate tax — the gain is added to your taxable income and taxed at your marginal rate. CGT applies to assets like investment properties, shares, cryptocurrency, collectibles over $500, and business assets.

How to Calculate Your Capital Gain

The basic formula is:

Your cost base includes the purchase price, stamp duty, legal fees, and any costs of improvement. It does not include maintenance or repairs.

The 50% CGT Discount

If you're an individual and you've held the asset for more than 12 months before selling, you only pay tax on half the capital gain. For example, if your gain is $100,000, only $50,000 is added to your taxable income. This discount does not apply to companies.

CGT Exemptions

• Your main residence: Your family home is generally exempt from CGT (the "main residence exemption")
• Cars and motorcycles: Exempt regardless of value
• Personal use assets under $10,000: Items like furniture or appliances
• Assets acquired before 20 September 1985: "Pre-CGT" assets are exempt
• Superannuation payouts: Generally exempt if received after age 60

CGT on Cryptocurrency

The ATO treats cryptocurrency as property, not currency. This means every time you sell, trade, swap, or gift crypto, it's a CGT event. You need to keep records of every transaction — purchase price, date, sale price, and any fees. The 50% discount applies if you held the crypto for more than 12 months.

Strategies to Minimise CGT

• Hold assets for more than 12 months to access the 50% discount
• Time your sale to a lower-income year if possible
• Offset gains with capital losses from other assets
• Ensure your cost base includes all eligible costs (stamp duty, legal fees, improvements)
• Consider contributing to super to reduce your overall taxable income