What is the 50% discount on capital gains tax?

Understanding the 50% Capital Gains Tax Discount in Australia

For Australian resident individuals, holding onto an investment for at least 12 months can lead to a valuable tax benefit — a 50% discount on capital gains tax (CGT). This means that if you sell an asset like shares, property, or a managed fund after owning it for more than a year, only half of the capital gain is included in your taxable income.

For example, if you make a $20,000 capital gain on shares held for 15 months, you’d only be taxed on $10,000 of that gain. This incentive is designed to encourage longer-term investment and can significantly reduce your tax bill when selling assets.

It's important to note that not all assets qualify. Your primary residence (the home you live in) is generally exempt from CGT altogether, provided it’s used solely for private purposes and sits on land under two hectares. Other assets, like cars or personal use items, may have different rules.

The discount applies automatically when you report a capital gain in your tax return, but accurate record-keeping is essential. You’ll need to show the purchase date, cost base, and sale details to prove you held the asset for more than 12 months.

While the 50% CGT discount is a cornerstone of Australia’s tax system for individuals, it doesn’t apply to companies or most trusts — they receive no such discount. SMSFs get a 33% discount if the asset was held for over 12 months, highlighting how the rules vary across entity types.

As tax laws can shift, it's wise to consult a registered tax adviser — especially near key dates like 6 November 2025, when updates may come into effect. Smart planning around the CGT discount can make a real difference to your after-tax returns.