Capital Gains Tax

The Capital Gains Tax (“CGT”) regime was introduced in Australia with effect from 20 September 1985.

Capital Gains tax in Australia is not a separate tax; it forms part of the income tax structure, with capital profits (as calculated and adjusted) being added to taxable income and taxed at the taxpayer’s marginal rate.

As such there is no stand-alone capital gains tax rate.

However the capital gains tax rules operate to modify the amount of capital profit which is included in a taxpayer’s income, the effect of which may reduce some or all of the tax on the transaction. In this sense it could be said that the capital gains tax rate differs from the usual tax rate.

There are specific and common exemptions of certain capitals profit from tax, one of the most common of which are gains from the sale of a principal place of residence.

What Is Capital Gains Tax? CGT applies generally to net gains made on disposal of capital assets, where the amount receivable is greater than the costs, and reduced by any capital losses.

From 21 September 1999, a discount of the amount of the capital gain on which income tax is paid is available, subject to qualifying conditions including residence.

Because the Capital Gains Tax is not a separate tax, there is no capital gains tax “rate” as such. The same income tax rates apply to ordinary income and net capital gains income.

In general, there is no capital gains tax on the sale of your main residence. (Non-residents however, have been excluded from this concession since 9 May 2017, subject to then existing properties being grandfathered until 30 June 2019.) There are a number of qualifying conditions and extensions and in some situations a partial exemption applies.

As a general principle, capital gains made by a non-resident are assessable only in relation to taxable Australian property.

Small businesses are eligible for special capital gains tax concessions, with the retirement concessions tied into the superannuation rules and recently enacted rollover relief for small business re-structures.

Capital Gains Tax Guide for Tax Returns

Each financial year the ATO publishes an update of their Capital Gains Tax Guide (online format).

This page was last modified 2020-05-11