Learn · How gains are taxed
The 50% CGT discount, and the 12-month rule
Hold an asset for at least 12 months and half the capital gain is taxed instead of all of it. The counting is stricter than most people assume.
If you sell an asset at a profit, that gain is added to your income for the year and taxed at your marginal rate. Hold it long enough first and only half the gain is counted. That is the capital gains tax discount, and for most individual investors it is the single largest lever in the tax treatment of a portfolio.
Who gets it, and how much
Two conditions have to be met: you owned the asset for at least 12 months, and you are an Australian resident for tax purposes. The size of the discount then depends on what kind of entity holds the asset.
- Individuals and Australian trusts reduce the gain by 50%.
- Complying super funds reduce it by 33.33%.
- Companies get no discount at all.
How the 12 months is counted
This is the part that catches people out. The clock does not run from purchase date to sale date inclusive. You exclude the day you acquired the asset and you exclude the day of the CGT event, and what is left has to be at least 12 months.
The CGT event is the moment the gain or loss happens, which is not always the moment money moves. If there is a contract of sale, the event is the contract date, not settlement. Property usually works this way, which is why a sale that settles in July can land in the previous financial year.
Two days apart, twice the tax
Bought 14 March 2025. Gain on sale: $10,000.
Sold 13 March 2026 — under 12 months. Taxed on the full $10,000.
Sold 16 March 2026 — over 12 months. Taxed on $5,000.
At a 37% marginal rate, that is $3,700 of tax against $1,850.
The discount is not automatic across your whole holding. It applies parcel by parcel. If you bought the same ticker three times, only the parcels that individually clear 12 months are discounted — which is why the parcel you sell matters.
Losses come first
The order of operations is fixed and it works against you if you assume otherwise. Capital losses are subtracted from your capital gains before the discount is applied, not after. A $10,000 discountable gain and a $10,000 loss do not leave you with a $5,000 loss to carry forward — they leave you with nothing, and the discount is never used.
Because of that ordering, losses are worth more when applied against gains that are not eligible for the discount. Working out which combination leaves the smallest taxable amount is arithmetic, not judgement, and it is what a CGT calculator is for.
This rule has an end date
The 50% discount is legislated to be replaced. From 1 July 2027 individuals, trusts and partnerships get cost base indexation instead, together with a 30% minimum tax rate on capital gains. This is law, not a proposal — it passed as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.
The reform applies only to gains that accrue on or after 1 July 2027. Gains that accrued before that date keep the 50% discount. So an asset you hold across the changeover has its gain split between two different regimes, and working out which part falls where depends on accurate purchase records and the asset’s value at the boundary.
When it does not apply
- Assets held less than 12 months, however narrowly.
- Gains made by a company.
- A home you first rented out or used for business less than 12 months before selling it.
- Assets where you use the indexation method instead.
Inherited assets and assets transferred in a relationship breakdown can count the previous owner’s holding period towards the 12 months, so an asset you have personally held for two weeks may still qualify.
Where this comes from
Written against ATO — CGT discount, and ATO — Reforming negative gearing and capital gains tax, last updated 29 June 2026. Checked 1 September 2026.
General information about how the rules work, not financial or tax advice. Your own circumstances change the answer.
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