Capital Gains Tax on Shares in Australia: A Complete Guide

Australia taxes capital gains - profits from selling assets - as ordinary income, with an important 50% discount for assets held longer than 12 months. Understanding the basics prevents costly mistakes.

• A capital gain is realised when you sell: CGT is triggered at the point of disposal - when you sell, transfer, or gift shares. An unrealised gain (shares worth more than you paid but not yet sold) is not taxable. This creates powerful planning opportunities around timing.
• The calculation: Capital Gain = Sale Proceeds − Cost Base. Cost base includes the purchase price plus brokerage on purchase. Sale proceeds are the amount received minus brokerage on sale. Example: Buy 1,000 CBA shares at $100 each ($100,000 + $20 brokerage = $100,020 cost base). Sell at $130 each ($130,000 − $20 brokerage = $129,980 proceeds). Capital gain = $129,980 − $100,020 = $29,960.
• The 50% CGT discount: If you hold shares for more than 12 months before selling, only 50% of the capital gain is included in your assessable income. In the example above, if held for 13 months, only $14,980 is added to your income. At a 37% marginal rate, the tax is $5,543 instead of $11,085 on the full gain.
• CGT is assessed in the financial year of sale: If you sell shares on 15 June 2025, the gain is assessed in your 2024-25 return (due October 2025). If you sell on 5 July 2025, it's assessed in your 2025-26 return. This creates a simple timing strategy: delay sales until after June 30 if your income is unusually high in the current year.
• CGT applies to each parcel separately: If you bought CBA shares in multiple parcels (100 in 2020, 200 in 2022, 150 in 2023), each parcel has its own cost base and holding period. When you sell, you can specify which parcel you're selling - allowing you to choose the most tax-effective parcel.

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Capital losses - selling shares for less than you paid - can offset capital gains, potentially eliminating or deferring tax. Used strategically, losses are valuable tax assets.

• Capital losses offset capital gains: If you have a $20,000 capital gain and a $5,000 capital loss in the same year, you pay tax on $15,000 net gain (applying the 50% discount if applicable). Losses must be applied before the 50% discount.
• Carrying forward losses: If capital losses exceed capital gains in a year, the excess is carried forward indefinitely. It can only offset future capital gains, not ordinary income. A $50,000 carried-forward loss from 2020 can eliminate up to $100,000 of future capital gains (before the 50% discount) in any future year.
• Tax-loss harvesting: Deliberately selling shares at a loss before 30 June to crystallise losses that offset gains elsewhere. Classic scenario: You sold a property in January realising a $60,000 gain. You hold shares in a company down 40% - sell them before 30 June, crystallise the $15,000 loss, reducing net gain to $45,000.
• The wash-sale trap: Unlike the US, Australia has no formal wash-sale rule - but the ATO's general anti-avoidance provisions (Part IVA) can apply if you sell shares at a loss and immediately repurchase them with no genuine change in economic position, if the dominant purpose is obtaining the tax benefit. In practice, waiting 30 days before repurchasing the same shares is standard cautious practice.
• Don't harvest losses on 12-month threshold assets: If shares are approaching their 12-month holding anniversary, wait until after the anniversary to sell at a gain (to access the 50% discount). If selling at a loss, the holding period doesn't matter - sell whenever useful.

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Accurate records are not just good practice - they're legally required. And choosing which parcel to sell when you have multiple purchases can meaningfully change your tax outcome.

• You must keep records: The ATO requires records of every share transaction for 5 years after the asset is disposed of. Records include: purchase date, number of shares, price per share, brokerage paid, sale date, sale price, brokerage paid on sale. Your broker's contract notes are the primary record.
• Choosing which parcel to sell (FIFO vs LIFO vs specific identification): The ATO allows you to choose which specific parcel you're disposing of. FIFO (first in, first out) sells the oldest parcel first - often over 12 months, qualifying for the 50% discount. LIFO (last in, first out) sells the newest - potentially useful if selling at a loss (holding period irrelevant) or if the oldest parcel has a much lower cost base creating a large gain.
• The strategic calculation: If you need to sell 200 shares and hold three parcels with different cost bases and holding periods, model each option. Selling the highest cost base parcel minimises gain. Selling a parcel held over 12 months applies the 50% discount. Sometimes selling a loss-making parcel to harvest the loss is optimal. Each situation requires its own calculation.
• DRP (Dividend Reinvestment Plans): Each DRP reinvestment creates a new parcel with its own cost base (the share price on the reinvestment date) and holding period. Years of DRP participation can create dozens of parcels. Ensure your records - or your broker's records - capture each reinvestment accurately.
• Sharesight and other tools: Sharesight is a portfolio tracker widely used by Australian investors that automatically tracks cost bases, holding periods, and calculates your CGT position across all parcels. The free tier covers up to 10 holdings; paid plans handle complex portfolios. It integrates with major Australian brokers.

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Different investment vehicles have specific CGT treatment. Understanding the nuances prevents unexpected tax bills.

• ETFs: CGT treatment for ETFs is identical to direct shares - you buy units at a price, sell units at a price, and the difference (minus brokerage) is your capital gain or loss. The 50% discount applies if held over 12 months. ETFs also distribute capital gains annually (from internal portfolio rebalancing) - these are assessable even if you didn't sell your units.
• Managed funds (unlisted): Managed funds can distribute capital gains to investors annually as part of their distribution - even if you haven't sold your units. These distributions must be included in your tax return. The fund will send you an Annual Tax Statement (ATS) detailing the components.
• International shares: Capital gains on overseas shares are assessed in Australian dollars. You must convert both the purchase price and sale proceeds at the ATO's official exchange rates on the respective dates. Currency gains and losses are embedded in the AUD calculation - this can complicate record-keeping significantly.
• Cryptocurrency: The ATO treats cryptocurrency as a capital gains tax asset, not currency. Every disposal (sale, trade, or use to purchase goods/services) is a CGT event. Record-keeping is required for every transaction. Crypto-to-crypto swaps (e.g., BTC to ETH) are also CGT events - a common area where Australians inadvertently create undisclosed gains.
• Employee share schemes (ESS): Shares acquired through an ESS may have a deferred taxation point - you may pay income tax when shares vest or when restrictions are lifted, and then CGT on any subsequent gain from the vesting/tax point to sale. ESS rules are complex; a tax agent familiar with equity compensation is advisable.

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CGT is reported in your individual income tax return. For simple portfolios this is straightforward; for complex ones it requires care.

• Where it appears: Item 18 of your individual return (Capital gains). You report total capital gains, capital losses, net capital gain (after losses and the 50% discount where applicable), and any carried-forward losses.
• The ATO pre-fills share data: For shares held on CHESS (ASX-listed shares bought through standard brokers), the ATO receives dividend and transaction data from the ASX. This pre-fills some information in myTax - but the cost base is not pre-filled. You must calculate and provide it.
• CGT schedules for large gains: If your total capital proceeds exceed $10,000 or your net capital gain exceeds $10,000, you may need to complete a CGT schedule attached to your return. Your accountant or tax agent handles this.
• Tax instalments for large gains: If you realise a large capital gain - a property sale, large share parcel, business sale - the ATO may not collect the tax until your return is lodged. Consider making voluntary tax payments during the year to avoid a large payment on lodgement (and potential shortfall interest charges on PAYG instalment variations).
• Timing with an accountant: If you have a complex CGT position (multiple asset types, carry-forward losses, international shares), engage a tax agent well before 30 June while you still have time to make strategic decisions. Post-June 30, most options are closed.

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