What Is CGT Discount?
Australian individuals who hold a capital gains asset for more than 12 months are entitled to a 50% capital gains tax (CGT) discount. Only half the capital gain is added to taxable income.
Definition
The CGT discount allows Australian resident individuals (and some trusts) to reduce a capital gain by 50% if the asset was held for more than 12 months before disposal. The discounted gain is then added to the individual's taxable income and taxed at their marginal rate. Assets held for 12 months or less attract CGT on the full gain. Capital losses must be applied against capital gains before the discount is applied; excess capital losses are carried forward to future years. The main residence exemption excludes most family homes from CGT entirely. Shares, investment properties, cryptocurrency, and other assets are all subject to CGT.
Formula
Example
You sell shares bought 2 years ago for a $40,000 capital gain. After the 50% CGT discount the taxable gain is $20,000. At a 37% marginal rate you pay $7,400 in CGT. Without the discount it would have been $14,800.