CGT Discount (50%)

Definition

Individual Australian resident taxpayers who hold a capital asset for at least 12 months before disposal are entitled to a 50% discount on the net capital gain. This means only half the gain is included in assessable income. The discount applies after capital losses have been offset. Trusts receive a 50% discount; complying super funds receive a 33.33% discount. Companies do not receive any CGT discount.

The 50% CGT discount is the reason most investors hold properties for at least 12 months. On a $200,000 gain at a 45% marginal rate, the discount saves $45,000 in tax. There is ongoing speculation the discount may be reduced in future budgets — making timing of disposals a critical planning consideration.

You sell an investment property held for 4 years with a net capital gain of $180,000. The 50% discount reduces the assessable gain to $90,000. At a 37% marginal rate, you pay $33,300 in tax instead of $66,600.

ITAA 1997, Division 115

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