The 50% CGT Discount Explained: Pay Less When You Sell

Updated for the 2026–27 financial year

The 50% CGT discount lets eligible individuals and trusts reduce a taxable capital gain by half when they sell an asset they have held for more than 12 months. In simple terms, if you have owned an asset long enough and you qualify, only half of your profit gets added to your income and taxed. This single concession can save investors thousands of dollars, yet it is widely misunderstood.

This article explains what the 50% CGT discount is, who can claim it, which assets qualify, how to work out the amount in real dollars, how it differs from the main residence exemption, and how the discount changes from 1 July 2027.

What is the 50% CGT discount?

Capital gains tax is the tax you pay on the profit you make when you sell an asset such as an investment property, shares or cryptocurrency. It is not a separate tax. The gain is added to your income and taxed alongside your wages and other earnings.

The 50% CGT discount is a concession that allows eligible individuals and trusts to reduce a taxable capital gain by half when the asset has been held for more than 12 months. This means only half of your gain is included in your tax return. The other half is effectively tax free. You can read more about how the concession applies in this guide to the 50% capital gains tax discount.

It is the gain that is halved, not the tax rate

A common point of confusion is the idea that capital gains are taxed at a flat 50% rate, or that you can somehow pay no tax at all. Neither is correct. The discount reduces the size of the gain, not the rate at which it is taxed.

Once the gain is halved, the remaining amount is added to your other taxable income and taxed at your marginal tax rate. So a person on a higher income will pay more tax on the same discounted gain than a person on a lower income. The discount lowers the taxable portion; your personal circumstances determine the rate that applies to it.

Who can claim the CGT discount?

The discount is not available to everyone. To claim it you generally must meet the following conditions.

• You are an individual (including a sole trader) or a trust. Complying superannuation funds receive a smaller discount, and companies receive no discount at all.
• You owned the asset for at least 12 months before the CGT event occurred.
• You are an Australian resident for tax purposes at the time of the CGT event, or the gain relates to taxable Australian property.

Trusts can claim the 50% discount and pass the benefit through to individual beneficiaries. The Australian Taxation Office sets out the eligibility conditions for the discount method in detail.

Foreign and temporary residents

Since 8 May 2012, the full 50% discount is no longer available on capital gains that accrue after that date for foreign residents and temporary residents. If only part of your ownership period occurred while you were an Australian resident, you may be entitled to a partial discount based on the proportion of time you held the asset as a resident.

Residency rules in this area are complex. If you have lived overseas during the period you owned an asset, it is worth getting advice before you sell.

Which assets qualify?

Most CGT assets are eligible for the discount, provided the holding period and residency tests are met. These include:

• Investment properties
• Shares and managed funds
• Cryptocurrency and other crypto assets

Some assets are exempt from CGT altogether, so the discount is not relevant to them. Assets acquired before 20 September 1985 are exempt. Collectables such as artwork, jewellery, antiques, coins, rare books and stamps are exempt if you acquired them for $500 or less. Macquarie Group Services maintains a useful summary of CGT assets and exemptions.

The discount also does not apply in certain situations. Companies cannot claim it. It does not apply to capital gains arising from the creation of a new asset, such as granting a lease or an option, or creating a restrictive covenant.

The 12 month holding rule explained

To use the discount, you must have held the asset for at least 12 months before the CGT event occurs. When you count the 12 months, you exclude both the day you acquired the asset and the day of the CGT event.

When the CGT event happens: contract date versus settlement

For most assets the CGT event happens on the contract date, not the settlement date. This is important for property, where contracts and settlement can be weeks or months apart.

Example: If you acquired an asset on 20 June 2025 and the CGT event was 20 June 2026, you count from 21 June 2025 to 19 June 2026. That is 364 days. Because you excluded the acquisition day and the CGT event day, you have not quite held the asset for 12 months and cannot use the discount method. Selling even one day later would have made all the difference.

Counting earlier ownership towards the 12 months

In some situations, earlier ownership can count towards the 12 month period. Assets acquired from a deceased estate, transferred to you during a relationship breakdown, or replaced under rollover relief provisions can still count toward the 12 months. This means you do not always have to start the clock from scratch.

Common traps that deny the discount

• Selling too early. If you dispose of an asset within 12 months of acquiring it, the discount is not available, even if you are just one day short.
• Creating a new asset. The discount does not apply to gains that arise from creating something new, such as granting a lease or an option, rather than disposing of an existing asset.
• Poor records. Without proper records of your purchase price, costs and dates, you cannot accurately prove your holding period or your cost base, and you risk paying more tax than necessary.

How to calculate the CGT discount step by step

Working out your discounted gain follows a clear order. Getting the order right matters, because applying losses and concessions before the discount usually gives the best result.

1. Subtract the cost base from your capital proceeds (the sale amount) to work out your gross capital gain.
2. Subtract any current year capital losses and any unapplied net capital losses carried forward from earlier years.
3. Apply any small business concessions you are eligible for. Capital losses and small business concessions should be applied before the discount.
4. Reduce the remaining gain by the relevant discount percentage, which is 50% for individuals and trusts.

You can choose which capital gains to subtract your losses from. If you have some gains that are not eligible for the discount, subtracting losses from those gains first gives the lowest overall CGT result.

Working out your cost base

Your cost base is more than just the purchase price. It generally includes the purchase price, stamp duty, legal and conveyancing fees, the cost of improvements, and your selling costs such as agent commissions. The cost base does not include amounts you have already claimed, or could claim, as a tax deduction.

For property, the ATO sets out a cost base formula of A + B + C + D − E − F, where A is the purchase price, B is the costs of purchase, C is the cost of property improvements, D is the costs of sale, E is capital works deductions, and F is the total decline in value deductions claimed over the period of ownership. The ATO explains this fully in its guidance on CGT when selling your rental property.

Worked example: CGT on an investment property

Example: Karl and Louisa bought a rental property as joint tenants in November 2016 for $750,000. They paid $30,000 in stamp duty and legal fees, and later built a fence for $6,000. Over seven years of ownership they claimed $5,000 in decline in value deductions and $35,000 in capital works deductions. They entered into a contract to sell in June 2026, with the property sold in November 2026 for $900,000, and paid $10,000 in selling costs.

Their cost base is $750,000 + $30,000 + $6,000 + $10,000 − $35,000 − $5,000 = $756,000.

Their capital gain is $900,000 − $756,000 = $144,000. Because they held the property for more than 12 months, the 50% discount reduces this to $72,000. As joint tenants, Karl and Louisa each report a capital gain of $36,000 ($72,000 × 50%) in the 2025–26 income year, because that is the year the contract was signed.

If they had held the property as tenants in common rather than joint tenants, they would each include the gain in line with their legal ownership share. For example, if Karl owned 10% he would include $7,200 ($72,000 × 10%) and Louisa, owning 90%, would include $64,800 ($72,000 × 90%).

How much tax you actually pay

After the discount is applied, the reduced gain is added to your taxable income for the year and taxed at your marginal tax rate. The Medicare levy is calculated separately and is not part of your marginal rate.

Example: Suppose you make a $100,000 profit on shares held for more than 12 months. The 50% discount reduces the taxable gain to $50,000. That $50,000 is then added to your other income for the year and taxed at your marginal rate. The actual dollar amount of tax depends on how much you already earn.

If you would like to estimate the figures for your own situation, this capital gains tax calculator can be a helpful starting point before you confirm the outcome with an adviser.

How the discount works for super funds and companies

The discount percentage depends on who owns the asset.

Complying superannuation funds, including self-managed super funds, are entitled to a 33.33% discount rather than 50%. With this discount, two thirds (66.67%) of the net capital gain is included in the fund’s assessable income, and that income is taxed at the concessional super rate of 15%. For a fund in the accumulation phase, the combination of the 33.33% discount and the 15% tax rate can produce an effective tax rate on a discounted capital gain as low as 10%.

Companies receive no CGT discount at all. A company pays tax on the full capital gain at the company tax rate, which is 25% for base rate entities with aggregated turnover under $50 million, or 30% for other companies. This is one reason the choice of ownership structure matters so much when you are planning an investment. Trinity Group provides a helpful overview of how the CGT discount applies across different entities.

CGT discount versus the main residence exemption

Many people searching for ways to avoid CGT on their home are actually thinking about the main residence exemption, not the discount. These are two different things.

The 50% discount reduces a taxable gain by half. The main residence exemption can remove the gain entirely. A full main residence exemption may apply if the dwelling was your home for the whole ownership period, was not used to produce assessable income, and the land is within the permitted area. In that case there is generally no capital gain to tax at all, so the discount never comes into play.

Indicators that a property is your main residence include the address on your electoral roll, driver licence and bank accounts, where your utilities are connected, where your family lives, and where your personal belongings are kept. No single factor decides it on its own.

The CGT six year rule

The six year rule allows a former home to keep being treated as your main residence for CGT purposes for up to six years after you move out, while it is being used to produce income such as rent. This is the absence rule within the main residence exemption framework, not a separate concession.

Some important points apply. Any rental income you earn during the absence must still be declared as assessable income in your tax return. The six year period can reset if you genuinely move back in and re-establish the property as your main residence before a later absence. If the property is rented continuously for more than six years, the excess period may create a partial exemption and a taxable capital gain. You can read a fuller explanation of the CGT six year rule and how it interacts with the main residence exemption.

For disposals after the transitional period ending 30 June 2020, foreign residents are generally not entitled to the main residence exemption, with only limited life event exceptions involving certain terminal medical conditions, death, or family law matters.

Can a couple have two main residences?

Generally, you cannot treat two properties as your main residence for the same period. There are limited overlap rules that apply for a short window when you are changing homes, which can allow both the old and the new property to be treated as your main residence for a brief overlap. Outside those rules, you usually need to choose one property as your main residence for any given period.

How the 50% CGT discount changes from 1 July 2027

Reforms to the discount announced in the 2026–27 Federal Budget on 12 May 2026 are now law. From 1 July 2027 the 50% CGT discount for individuals, trusts and partnerships is replaced with cost base indexation and a 30% minimum tax rate on capital gains.

Some key points are worth knowing. The new rules apply only to gains that accrue from 1 July 2027. Gains realised before that date keep the current 50% discount. For assets held before that date but sold afterwards, the current discount applies to gains accrued up to 1 July 2027 and the new rules apply to gains accruing from that date. The main residence exemption and the four small business CGT concessions are unchanged, and the change applies to individuals, trusts and partnerships rather than to the discount for superannuation funds. Recipients of means tested income support payments such as the Age Pension are exempt from the minimum tax in any year they receive a payment.

Until 30 June 2027 nothing changes. The current 50% discount continues to apply to gains realised in 2025–26 and 2026–27. You can read the ATO’s summary of the CGT discount and negative gearing changes.

Get the most from the CGT discount

The 50% CGT discount can dramatically reduce the tax you pay when you sell an investment, but only if you meet the conditions. Timing matters, because selling even one day short of 12 months can cost you the entire discount. Accurate cost base records matter, because every eligible cost reduces your gain. Your residency status, the entity that owns the asset, and any concessions or capital losses you can apply all change the final outcome.

With the reforms legislated to start on 1 July 2027, planning ahead is more valuable than ever. If you are thinking about selling an investment property, shares or another asset, getting the structure and timing right could save you thousands of dollars. A short conversation with our team can help you understand your position and plan your sale so you reduce CGT legally and confidently.

About The Author: Artur Osadchiy

Artur is a Certified Practising Accountant with over 30 years’ experience working as a trusted advisor to 600+ clients across Australia. Based in Melbourne, he started Tax Window with his wife Marina in 2009 and leads the firm’s tax and accounting team. In his free time, Artur enjoys watching the AFL (go Kangas!) and spending time with family.

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