How Australia's main CGT concession works, who qualifies, and what changes from 1 July 2027.
The 50% Capital Gains Tax discount is one of the most valuable concessions in the Australian tax system. If you sell an asset like shares, an ETF, or an investment property at a profit, and you've held it for more than 12 months, only half of that gain is added to your taxable income. The other half is tax-free. This guide explains how the discount works, who can use it, where it doesn't apply, and what's about to change.
When you sell an asset for more than you paid, the profit is a capital gain. Capital gains aren't a separate tax, they're added to your other income and taxed at your marginal rate. The 50% CGT discount lets you reduce that gain by half before it hits your tax return, as long as two conditions are met: you've owned the asset for at least 12 months, and you're an Australian resident for tax purposes. The ATO's CGT discount page sets out the full rules.
Here's a worked example. You buy $30,000 of shares in March 2024 and sell them in April 2026 for $42,000. Your capital gain is $12,000. Because you held the shares for more than 12 months, you apply the 50% discount and report a $6,000 taxable gain in your tax return. If you're on a 30% marginal rate, that's $1,800 of tax instead of $3,600. Hold the same shares for only 11 months and the full $12,000 is taxable.
The 12-month ownership requirement is stricter than it sounds. You exclude both the day you acquired the asset and the day of the CGT event when counting. For property sales, the CGT event is the contract date, not the settlement date, so the clock stops the day you sign, not the day the keys change hands. If you sell an asset without a contract, the CGT event is the date of sale. If an asset is lost or destroyed, it's the date you receive insurance or compensation.
In a few cases you can count somebody else's ownership period towards your 12 months. Assets inherited through a deceased estate (where the deceased acquired the asset on or after 20 September 1985) carry forward the original ownership period. Assets transferred between spouses under a relationship breakdown also combine both partners' holding periods. And replacement assets received through a CGT rollover can include the original asset's ownership time.
The full 50% discount is available to Australian resident individuals, including beneficiaries of trusts and partners in partnerships. Australian trusts can also discount a capital gain by 50% on the same 12-month basis. Complying superannuation funds get a smaller discount of 33.33%, which is why long-term gains inside super are taxed so lightly. Companies, however, get nothing: they pay tax on the full nominal gain regardless of how long they held the asset, which is one reason most direct investing in Australia is done through individuals and trusts rather than companies.
| Entity Type | CGT Discount | Notes |
|---|---|---|
| Australian resident individual | 50% | Standard discount on assets held more than 12 months |
| Australian trust | 50% | Same 12-month rule; flows through to beneficiaries |
| Complying super fund | 33.33% | Reduced discount for super assets held over 12 months |
| Company | 0% | No discount available regardless of holding period |
| Foreign or temporary resident | Apportioned | No discount on gains accrued after 8 May 2012 unless an Australian residency period applies |
| Affordable housing provider (individual) | up to 60% | Standard 50% plus an extra 10% for qualifying affordable rental housing |
There are several situations where you can't claim the discount even if you've held the asset for over a year. The ATO lists them in detail; the main ones to know are:
One detail that catches people out: capital losses must be subtracted before the discount is applied. If you have a $10,000 gain on shares held over 12 months, and a $4,000 loss on shares sold the same year, the calculation runs $10,000 − $4,000 = $6,000, then $6,000 × 50% = $3,000 taxable gain. You can't apply the discount first and then subtract the loss from the smaller number. Capital losses can also be carried forward to future years indefinitely until you have a gain to offset them against.
Less well known: Australian residents who provide affordable rental housing to low- to moderate-income tenants can receive an extra 10% discount on top of the standard 50%, bringing their total CGT discount to 60%. The rules require the property to be managed through a registered community housing provider and rented at below-market rates. The ATO has a dedicated page on the CGT discount for affordable housing.
The 2026-27 Federal Budget, handed down on 13 May 2026, announced that the 50% CGT discount will be replaced for assets acquired from 1 July 2027. The replacement has two parts: the cost base of an asset will be uplifted by CPI (inflation) over the holding period, and a 30% minimum tax rate will apply to whatever real gain remains. The Government's tax reform package describes the change as "restoring the original intent of the CGT arrangements", Australia did in fact use indexation until 1999, when the Howard Government replaced it with the flat 50% discount.
The important thing for anyone currently holding assets: the changes apply only to gains arising after 1 July 2027 on assets acquired after that date. Existing assets are grandfathered indefinitely. If you bought ETF units in 2023 and sell them in 2035, you still get the 50% discount. The new rules also include exemptions for new builds (investors can choose either method), Age Pension and JobSeeker recipients, the affordable housing 60% discount, and small business CGT concessions. We've written a separate piece on the broader CGT and negative gearing changes from 2027 that goes into the detail.
Whether you use the current 50% discount or the future indexation method, accurate records are essential. The ATO expects you to keep purchase and sale contracts, brokerage statements, records of incidental costs (legal fees, stamp duty, agent commissions), and any improvement costs that form part of the cost base. Records must generally be kept for five years after the CGT event. For long-held assets, that means decades of paperwork, many investors use the ATO's CGT record keeping tool to stay on top of it.
Disclaimer: This guide offers general information about the 50% CGT discount in Australia and is not intended as financial or tax advice. CGT rules are complex and individual circumstances vary. Always refer to the official ATO website for the latest information, and consult a qualified tax professional for advice tailored to your situation.