Selling Shares Or Investments? What You Need To Know About CGT

When you sell shares or investments in Australia, chances are you’ll trigger a capital gain or loss. This means Capital Gains Tax (CGT) may apply. While the term can sound daunting, the concept is fairly straightforward: if you sell for more than you paid, the gain is taxed. If you sell for less, you may be able to offset the loss against other gains. In this article, we’ll explain how CGT works on shares and investments, how to calculate it, and what your reporting obligations are.

What Is Capital Gains Tax (CGT)?

CGT is not a separate tax. Rather, it forms part of your income tax. When you make a profit (or “gain”) from selling an asset, including shares or other investments, that gain gets added to your taxable income for the year.

In Australia, CGT applies to the disposal of capital assets such as:

• Shares and ETFs
• Managed funds
• Cryptocurrencies
• Units in trusts
• Property (excluding your main residence in most cases)

CGT applies to both Australian residents and non-residents, though there are different rules for each.

When Is CGT Triggered on Shares and Investments?

CGT is triggered when a “CGT event” happens. For shares and investments, this usually means:

• Selling or gifting shares
• Switching between managed funds
• Receiving a capital distribution from a trust
• Redeeming or cancelling shares

The date you sell (or dispose of) the asset is what matters for tax purposes—not the settlement date.

How to Calculate CGT on Shares and Investments

Step 1: Work Out the Capital Proceeds

This is what you received when you disposed of the investment. For shares, it’s usually the sale price, minus any transaction costs like brokerage.

Step 2: Determine Your Cost Base

The cost base includes:

• Purchase price of the investment
• Brokerage fees and commissions
• Other incidental costs (e.g. stamp duty, if applicable)

Step 3: Calculate the Capital Gain or Loss

Capital Gain = Capital Proceeds – Cost Base

If the result is positive, you’ve made a gain. If it’s negative, you’ve made a capital loss.

Step 4: Apply Any Available Discounts

If you held the investment for at least 12 months before disposing of it, you may be eligible for a 50% CGT discount (individuals and trusts only).

Step 5: Offset Losses

If you made capital losses this year or have prior year carried-forward losses, you can offset them against current-year gains. You must apply losses before applying any CGT discount.

Example:

Jane buys 1000 shares in Company A for $10,000, including brokerage. She sells them 18 months later for $15,000, after brokerage. She has no prior capital losses.

• Capital Proceeds: $15,000
• Cost Base: $10,000
• Capital Gain: $5,000
• CGT Discount: 50%
• Taxable Capital Gain: $2,500 (added to her income)

Reporting CGT in Your Tax Return

CGT events must be reported in your annual tax return. For individuals, this is done in the “Capital Gains” section. Even if you made a loss, it’s important to report it so you can carry it forward.

Documents You Need:

• Buy and sell contracts
• Brokerage statements
• Dividend reinvestment statements
• Any documents relating to corporate actions (splits, consolidations, etc.)

The ATO’s myTax system often pre-fills some data (particularly from brokers and share registries), but it’s up to you to ensure accuracy.

Common Issues and Mistakes

Not Keeping Records

Without records, calculating your cost base is almost impossible. This is particularly important for long-held investments.

Incorrect CGT Discount Application

Only apply the discount if you’ve held the asset for more than 12 months. The 12-month period starts the day after you bought the asset.

Overlooking Distributions

Distributions from managed funds can include capital gains. These need to be reported even if you haven’t sold anything.

CGT on Specific Investment Types

Managed Funds

Many managed funds distribute capital gains throughout the year. These are included on your annual tax statement and must be reported.

ETFs

ETFs are generally treated the same as shares, but may also include income and capital gains distributions.

Cryptocurrency

Selling, swapping, or using crypto for purchases is treated as a CGT event. The same calculation and discount rules apply.

Strategies to Manage Your CGT

Hold for More Than 12 Months

This allows you to access the 50% discount, significantly reducing your tax liability.

Harvest Capital Losses

Selling underperforming assets to realise a capital loss can offset gains elsewhere.

Timing Sales Near Year-End

Consider the timing of CGT events—deferring a gain to the next financial year could result in a lower tax bill.

Final Thoughts

Capital Gains Tax on shares and investments in Australia is manageable once you understand the key steps: know your cost base, track your proceeds, apply the appropriate discounts, and report it correctly. Recordkeeping is essential, and smart timing or tax strategies can minimise your liability.

If you’re unsure, speaking with a qualified accountant or tax adviser can help you stay compliant and optimise your position.

Meta Description: Learn how Capital Gains Tax (CGT) works on shares and investments in Australia. Understand calculation, discounts, and reporting requirements with simple examples.