Capital Gains Tax (CGT) on selling investment assets: The Basics

In Australia, CGT is a part of your income tax and applies to the capital gain made on the disposal of any asset purchased after 20 September 1985. The gain is calculated as the difference between what it cost you to acquire the asset and what you received when you disposed of it. Here are key points to consider:

1. Inclusion in Income Tax

  • How It Works: Capital gains are included in your income tax and taxed at your marginal tax rate. This means that the tax rate applied to your capital gain can vary significantly based on your overall taxable income.
  • Timing: It’s crucial to note that CGT is triggered in the year the contract is signed, not when settlement occurs. This timing can affect which tax year your capital gain will be considered.

2. CGT Discount

  • Eligibility: If you’ve held an asset for more than 12 months before selling, you may be eligible for a CGT discount. For individuals and small business owners, this discount is currently 50%, effectively halving the taxable gain.
  • Application: This discount is crucial for long-term investors, as it can significantly reduce the tax payable on gains.

3. Small Business Concessions

  • Scope: Several CGT concessions are available for small businesses, including exemptions and rollovers that can reduce or defer the capital gains from the sale of business assets.
  • Criteria: These concessions have specific eligibility criteria, such as asset limits and active asset tests, that must be met.

4. Real Estate Considerations

  • Main Residence Exemption: The sale of your main residence is generally exempt from CGT, provided certain conditions are met.
  • Investment Properties: For investment properties, CGT applies, but costs such as acquisition, improvement, and selling expenses can be included in the asset’s cost base, potentially reducing the capital gain.

5. Shares and Other Investments

  • Record Keeping: It’s essential to keep detailed records of your investment transactions, including purchase and sale dates, costs, and proceeds, to accurately calculate your capital gain or loss.
  • Losses: Capital losses can be carried forward indefinitely to offset future capital gains but cannot be used to reduce other types of income.

Planning and Strategy

  • Timing of Sale: Consider the timing of your asset sale carefully, as it can impact your overall tax liability. For example, selling in a year when your income is lower may result in a lower marginal tax rate on the gain.
  • Record Keeping: Maintain meticulous records of all transactions, improvements, and expenses related to your investment assets. This diligence is key to maximising your eligible deductions and accurately reporting your capital gain or loss.
  • Professional Advice: Given the complexities of CGT on selling investment assets and the potential for significant financial impact, seeking professional tax advice is highly recommended. A tax professional can help you develop strategies to minimise your CGT liability and ensure compliance with tax laws.


The sale of investment assets and the resulting capital gains tax obligations are an integral part of your investment journey. Understanding the basics of CGT on selling investment assets, including how gains are calculated, the discounts and exemptions available, and the importance of strategic planning, can help you navigate the tax implications of your investment decisions more effectively.

Armed with this knowledge and the assistance of a tax professional, you can make informed decisions that align with your financial goals and tax obligations, ensuring a more favorable outcome when selling investment assets.