What Is Capital Gains Tax and When Does It Apply?
Capital gains tax (CGT) is not a separate tax — it is the part of your income tax that applies to the profit ("capital gain") you make when you dispose of a CGT asset, most commonly by selling it. CGT is a federal tax administered by the Australian Taxation Office (ATO) and applies the same way in every state and territory. A "CGT event" is most often a sale, but can also include a gift, the loss or destruction of an asset, or certain changes in ownership structure. Common CGT assets include investment properties, shares, managed fund units, business assets, and farmland — but excludes most personal use assets and, in most cases, your own home (see the main residence exemption below).
How Is CGT Calculated Today?
The basic formula is: capital proceeds (what you received) minus the cost base (broadly, what you paid plus qualifying ownership costs) equals your capital gain or loss. For Australian resident individuals and trusts who have owned the asset for at least 12 months before the CGT event, a 50% CGT discount currently applies — only half of the net capital gain is added to assessable income and taxed at marginal rates. Complying superannuation funds get a 1/3 discount instead, for an effective ~10% tax rate. Assets held for less than 12 months, and companies, are not eligible for any discount. Capital losses can be used to offset capital gains in the same year, or carried forward to offset future gains. See ourfull guide to how the CGT discount works for exactly how the 12-month rule is counted and what changes from 1 July 2027.
The Main Residence Exemption
Your main residence — the home you actually live in, with a dwelling on it — is generally exempt from CGT altogether. Full eligibility depends on factors including how long you lived there, whether you used part of it to earn income, and whether you have moved out and are renting it, where the "six-year rule" can extend the exemption: you can still treat a former home as your main residence for up to six years after moving out and renting it (resetting with each new absence), or indefinitely if it's left vacant. These situations are common for rural and lifestyle property owners and are worth a dedicated professional check.
How Will CGT Change From 1 July 2027?
Now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (both assented 26 June 2026), from 1 July 2027:
- The 50% CGT discount for individuals, trusts and partnerships is replaced by cost base indexation — your original cost base is adjusted for inflation, so tax applies to the real (inflation-adjusted) gain rather than half the nominal gain.
- A new 30% minimum tax rate applies to capital gains, regardless of your marginal income tax rate for that year.
- The changes apply only to gains that accrue after 1 July 2027 — they are not retrospective.
- Investors in new residential property may choose, on disposal, between the current 50% discount and the new indexation-plus-minimum-tax regime.
- There is no announced change to the CGT discount for superannuation funds.
- A related, separate measure limits negative gearing for residential property investment to new builds from 1 July 2027; properties already held at 7:30pm AEST on 12 May 2026 are exempt from that specific change.
CGT and Rural or Farming Property
Where farmland is held and operated as part of a genuine primary production business (rather than as a passive investment or lifestyle asset), the small business CGT concessions may reduce or eliminate CGT on sale. Broad-level eligibility requires either aggregated turnover under $2 million, or passing the maximum net asset value test (net assets of the business and connected entities of $6 million or less). This is one of the more complex areas of Australian tax law, and every reader in this situation should seek further advice from a registered tax agent or accountant before making a decision.
Frequently Asked Questions
Do I pay CGT on my family home?
Generally no, if it genuinely qualifies as your main residence for the whole ownership period. Partial exemptions can apply if you used part of the home to produce income or lived elsewhere for part of the ownership period.
Is CGT a separate tax from income tax?
No — any net capital gain is added to your other taxable income and assessed as part of your annual income tax return.
Does the CGT discount still exist after 1 July 2027?
For individuals, trusts and partnerships, the flat 50% discount is replaced by cost base indexation plus a 30% minimum tax rate. It only affects gains accruing after that date.
Where can I get a precise calculation for my situation?
This page and its calculator provide general information and an estimate only — always confirm your specific position with a registered tax agent or accountant, particularly for farmland, small business assets, or ownership structures involving trusts or companies.
Updated on 2026-07-12 — what changed
Initial publication of this page, drafted from primary ATO and legislation.gov.au sources current as of 12 July 2026.