Capital Gains Tax

Definition

Capital Gains Tax is a tax levied on the profit (capital gain) realised when you dispose of an asset — such as an investment property — for more than its cost base. In Australia, CGT is not a separate tax; the gain is added to your assessable income and taxed at your marginal rate. Assets held for 12+ months by individuals may qualify for a 50% CGT discount.

For property investors, CGT is often the single largest tax event. Understanding your cost base, discount eligibility, and timing of a sale can mean tens of thousands of dollars in savings. The 6-year rule, main residence exemption, and 50% discount are critical planning levers.

You buy an investment property for $500,000 (including stamp duty and legals). After 3 years you sell for $650,000. Your capital gain is $150,000. With the 50% discount, only $75,000 is added to your taxable income.

ITAA 1997, Part 3-1 — View on ato.gov.au →

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