Capital gains tax in Australia: rules, exemptions and examples

Understand capital gains tax in Australia before you sell property, shares, or other assets. Capital gains tax (CGT) is part of Australia’s income tax system, and the amount you may need to report depends on factors such as the asset, your cost base, available exemptions, and your residency status. These rules can be especially important for expats and investors selling Australian property after moving overseas. This guide explains how CGT works, how to calculate a gain, the main property exemptions, the rules for foreign residents, and what to check before you sell.

This guide is general information only, not personal tax, legal, or financial advice. Tax outcomes depend on the asset type, ownership period, residency status, and your personal circumstances.

Key takeaways

• CGT is not a separate tax: A net capital gain is generally added to your assessable income for the year. See the ATO’s What is capital gains tax? guidance.
• A CGT event usually starts the process: Selling is common, but gifting, transferring, losing, or destroying an asset can also matter.
• The 12-month discount can help: Eligible Australian residents can usually reduce a capital gain by 50% after 12 months. Check the ATO’s Calculating your CGT guidance.
• Losses do not cut salary tax: Capital losses generally offset capital gains only, and unused losses can be carried forward.
• Your main home may be exempt: The main residence exemption can remove all or part of a gain, but renting or mixed use can change the outcome. Check the ATO’s Eligibility for main residence exemption guidance.
• Residency can change the result: Foreign residents usually face different discount and main residence rules, and withholding is not always the final tax bill. See the ATO’s Main residence exemption for foreign residents guidance.

For broader context, see Expatica’s guide to the tax system in Australia. This guide explains when CGT applies, how gains and losses are calculated, how property exemptions work, and what expats and foreign residents should check before selling.

How capital gains tax works in Australia

Capital gains tax applies when you make a gain on a CGT asset. The ATO explains that CGT is part of income tax, so individuals usually include their net capital gain in assessable income rather than paying a flat standalone CGT rate.

In practice, a CGT event often happens when ownership changes. That usually means a sale, but not every trigger involves cash changing hands. A gift, transfer, loss, destruction, or some residency changes can also matter.

A common question is whether CGT only applies to property. It does not. Common CGT assets include investment property, shares, managed funds, business assets, and assets you inherited and later sold.

One thing worth knowing is that timing often turns on the contract date, not settlement. That matters because Australia’s financial year runs from 1 July to 30 June, and the contract date can decide which return the gain appears in.

Common assets that may trigger CGT include:

• investment properties
• shares and exchange-traded investments
• managed fund units
• business assets
• inherited assets sold later
• some collectables and personal-use assets in specific cases

What counts as a CGT event?

A CGT event can happen when you:

• sell an asset
• transfer it to someone else
• gift it
• lose it or it is destroyed
• receive compensation for it
• stop being an Australian resident in a way that changes how some assets are treated

What assets are exempt or partly exempt?

Not every gain is taxable. Your main home may qualify for the main residence exemption, some assets bought before 20 September 1985 are pre-CGT, and cars and motorcycles are generally exempt.

Some outcomes are only partly exempt, especially if a home was rented out or used to earn income. This is different from state taxes such as stamp duty and land tax, which are separate from federal CGT rules. For related state-based costs, see Expatica’s guide to property taxes in Australia.

How to calculate CGT step by step

If you are trying to work out CGT Australia rules before a sale, the key question is not “what is the rate?” but “what is my net capital gain?” The order matters, and skipping a step can give the wrong answer.

The ATO’s Calculating your CGT guidance is the best place to verify the order.

Here is a simplified property example. It shows the mechanics, not a final tax bill, because your actual tax outcome depends on your total taxable income and circumstances.

Item	Amount
Sale price	A$820,000
Purchase price	A$600,000
Stamp duty and legal fees on purchase	A$25,000
Capital improvements	A$30,000
Selling costs	A$15,000
Cost base	A$670,000
Capital gain before losses	A$150,000
Less prior-year capital loss	A$20,000
Gain after losses	A$130,000
Less 50% discount, if eligible	A$65,000
Net capital gain included in assessable income	A$65,000

This example is simplified and illustrates the calculation sequence only. Actual tax outcomes depend on the taxpayer’s circumstances and current ATO rules.

A short shares example can help too. If you bought shares for A$10,000 and sold them for A$14,000 after 18 months, a carried-forward capital loss of A$1,000 would usually reduce the gain to A$3,000 before any eligible discount is applied.

How to verify: use the ATO’s CGT guidance and, for home sales, its CGT property exemption tool before you lodge.

What goes into your cost base?

Your cost base is not just the purchase price. It can also include costs such as:

• stamp duty
• conveyancing and legal fees
• brokerage
• agent and advertising fees on sale
• eligible capital improvements

Poor records can lead people to overstate their gain because they may forget costs they were allowed to include.

How capital losses and the 12-month discount work

These two rules are easy to mix up. Capital losses are usually applied first, and only then do you work out whether a remaining gain qualifies for the 12-month discount.

For example, if you make an A$20,000 gain, have an A$5,000 carried-forward capital loss, and qualify for the 50% discount, you would usually reduce the gain to A$15,000 first and then discount that amount. Capital losses generally cannot reduce salary or wage income, and foreign or temporary residents may not get the full discount in the same way as Australian residents.

Property and main residence rules

Property is where much of the CGT confusion starts. Readers often want a yes-or-no answer, but the real answer depends on how the property was used over time.

If a property was your main home for the whole ownership period, was not used to produce income, and sits on land of two hectares or less, a full exemption is more likely. If it was partly rented, fully rented later, or used for business, the exemption may be partial instead.

This is also where readers sometimes mix up federal CGT with state charges. CGT is a federal tax issue. Stamp duty, land tax, and council rates are separate and depend on state or local rules.

If you are selling a home or investment while living abroad, the risk is assuming the property rules stay the same after your residency changes. For practical sale steps, see Expatica’s guide to selling property in Australia.

Scenario	Likely CGT treatment
Main home for full ownership period	Often fully exempt
Main home later rented out	Full or partial exemption may apply, depending on timing and choices
Investment property	Usually subject to CGT
Room rented out or part used for business	Often partial exemption only

These scenarios are general illustrations. The actual treatment can depend on timing, use of the property, residency, and other circumstances.

Main home vs investment property

The ATO calls the home exemption the main residence exemption. It usually applies when the dwelling was your main residence for the whole ownership period, was not used to produce income, and is on land of two hectares or less.

An investment property is different because gains are usually not fully exempt. If the property earned rent, was partly used for income, or changed purpose over time, you may need to work through a partial exemption instead of assuming a full one. The ATO’s Eligibility for main residence exemption page is the best starting point.

Rented rooms, absence rule and mixed use

Edge cases often change the result:

• renting out one room can create a partial CGT exposure
• moving out and renting the whole home can interact with the absence rule
• using part of the home for business can reduce the exemption
• the six-year rule can sometimes keep main residence treatment for a limited period

Verify mixed-use and long-absence cases carefully with the ATO, especially if there is more than one property involved.

Residency rules for expats and foreign residents

If you are an expat, the key question is your tax residency, not your visa label. The ATO says tax residency can be different from immigration status, and that difference can change which assets Australia taxes.

In broad terms, foreign and temporary residents are usually taxed on taxable Australian property, such as Australian real estate, rather than on every asset they own worldwide. Some CGT benefits also change once you become a foreign resident.

One thing worth knowing is that leaving Australia does not automatically mean the same CGT treatment continues. If you later sell Australian property while overseas, foreign resident capital gains withholding may apply. That withholding is not necessarily your final tax liability, so you still need to work out the actual position.

Use this quick checklist:

• Are you a resident for tax purposes, a temporary resident, or a foreign resident?
• Is the asset taxable Australian property?
• Did your residency change during ownership?
• Are you expecting the full 50% discount or a main residence exemption?
• Could withholding apply at settlement if the asset is Australian real property?

Resident, temporary resident and foreign resident

An Australian resident for tax purposes is not the same as a visa holder or citizen. The ATO uses tax residency tests, and temporary resident status can also change the outcome.

In practice, residents are usually taxed more broadly, while foreign and temporary residents are generally taxed on taxable Australian property for CGT purposes. If you are unsure, check the ATO’s residency guidance before relying on a tax outcome.

Main residence exemption and foreign resident rules

This is one of the most important expat traps. A foreign resident selling Australian residential property is generally not entitled to the main residence exemption in the same way, even if the property used to be their home.

Limited exceptions can apply under the life events test, so do not assume the answer is always no or always yes. The ATO’s Main residence exemption for foreign residents page is the right place to check current rules.

Records, reporting and common mistakes

Good records can lower stress and sometimes lower the taxable gain as well. If you cannot prove parts of your cost base, you may end up reporting a bigger gain than necessary.

Keep records for purchase, sale, improvements, ownership shares, and prior-year capital losses. Moneysmart notes that good records help you calculate gains and losses and should generally be kept for five years after you include the capital gain or loss in your return.

Before lodging, gather:

• purchase contract and settlement statement
• sale contract and selling invoices
• stamp duty, legal, agent, and brokerage records
• receipts for capital improvements
• prior-year tax records showing capital losses

CGT is reported through your Australian tax return for the relevant year. Self-lodgers usually lodge by 31 October, and Expatica’s guide to filing your income tax in Australia explains the wider process.

Common mistakes include:

• thinking CGT is a flat tax rate
• using settlement instead of contract date
• assuming the main residence exemption is automatic
• forgetting that capital losses do not offset wages
• assuming withholding is the final tax amount

2027 CGT reforms and what to watch

The CGT reforms announced in the 2026–27 Budget were legislated in June 2026 and are scheduled to apply to gains accruing from 1 July 2027. Until then, current CGT rules remain the starting point.

If you are selling before 1 July 2027, current CGT rules remain the starting point.

The Government’s Budget 2026–27 tax reform page says the changes replace the 50% CGT discount with an inflation-based approach and introduce a minimum 30% tax on gains from 1 July 2027. The same page says the reforms apply only to gains arising after that date.

How to verify: check the official Budget material and the latest ATO and legislation updates, not commentary alone. If a plan depends on the 2027 rules, get advice before acting.

When to get professional help and manage money across borders

Self-guided research is useful, but some situations need tailored help. Get advice if you are selling property, dealing with a mixed-use home, changing residency, handling inherited assets, or facing a large gain.

If you need cross-border support after the tax question is clear, a Wise account may help you hold AUD and other currencies, convert money at the mid-market rate, and send money internationally. That can be relevant if you need to pay an ATO bill from overseas or move sale proceeds abroad. Compare the total cost with other available providers, and remember that Wise is not tax advice and does not reduce CGT.

Conclusion

CGT in Australia is part of the income tax system, and the result depends on the asset, how long you held it, any capital losses, exemptions, and your residency. Property sales need particular care because main residence and foreign-resident rules can change the outcome. Keep records that support your cost base and use the correct tax year, which is often determined by the contract date. If your situation involves mixed use, residency changes, inherited assets, or a significant gain, verify the current ATO guidance or speak with a registered tax agent before lodging.

Sources

• Australian Taxation Office — What is capital gains tax?: Overview of how capital gains tax works as part of Australia’s income tax system and when CGT may apply, checked on 5 September 2026.
• Australian Taxation Office — Calculating your CGT: Guidance on calculating capital gains and losses, applying capital losses, and working out eligible CGT discounts, checked on 5 September 2026.
• Australian Taxation Office — Eligibility for main residence exemption: Information on when a home may qualify for the main residence exemption and when only a partial exemption may apply, checked on 5 September 2026.
• Australian Taxation Office — Foreign residents and capital gains tax: Guidance on CGT rules for foreign and temporary residents, including taxable Australian property and residency-related considerations, checked on 5 September 2026.
• Australian Taxation Office — Main residence exemption for foreign residents: Information on restrictions and limited exceptions affecting the main residence exemption for foreign residents, checked on 5 September 2026.
• Moneysmart — Investing and tax: General guidance on how investment income, capital gains, capital losses, and investment-related records are treated for tax purposes, checked on 5 September 2026.
• Budget 2026–27 — Tax reform: Australian Government overview of the CGT reforms applying to gains accruing from 1 July 2027, checked on 5 September 2026.