What Is Capital Gains Tax in Australia?
Capital gains tax in Australia is the tax you pay on the profit (the capital gain) made when you sell or dispose of an asset. It was introduced in Australia on 20 September 1985, and any asset acquired after that date is subject to CGT rules.
CGT is not a standalone tax with its own rate. The gain is added to your assessable income for the year and taxed at your marginal income tax rate. For high-income earners, that means up to 47% (including the 2% Medicare Levy).
CGT applies to:
- Shares and managed fund investments
- Investment properties
- Commercial property
- Business assets (goodwill, equipment, intellectual property)
- Sale of a business as a going concern
- Cryptocurrency
- Foreign assets
- Collectables above $500 in value
CGT does not apply to:
- Your primary place of residence (with conditions)
- Cars and motorcycles
- Personal use assets under $10,000
- Assets acquired before 20 September 1985
For business owners, understanding CGT is especially important when planning the sale of a business, restructuring, or disposing of major assets. Our Business Advisory team can help you plan disposals in a way that minimises the tax impact before it happens, not after.
How Much Is Capital Gains Tax in Australia?
There is no single capital gains tax rate in Australia. The gain is added to your other income and taxed at your marginal rate. For FY2026, the individual marginal rates are:
| Taxable Income | Marginal Tax Rate |
|---|---|
| $0 to $18,200 | Nil (tax-free threshold) |
| $18,201 to $45,000 | 19% |
| $45,001 to $135,000 | 32.5% |
| $135,001 to $190,000 | 37% |
| $190,001 and above | 45% |
The Medicare Levy of 2% applies on top of these rates for most taxpayers. For companies, CGT is taxed at the company tax rate: 25% for small businesses with aggregated turnover under $50 million, and 30% for larger companies. Importantly, companies do not receive the 50% CGT discount available to individuals and trusts.
A Worked Example
You are a sole trader. You sell your business for $600,000. Your cost base is $200,000. Your capital gain is $400,000. You have owned the business for more than 12 months, so you apply the 50% CGT discount: taxable gain becomes $200,000. This $200,000 is added to your other income for the year and taxed at your marginal rate. That is where the small business CGT concessions come in.
The 50% CGT Discount
If you are an individual or a trust and you have held an asset for more than 12 months before selling it, you are entitled to a 50% CGT discount. This means only half of your capital gain is included in your assessable income. Companies do not receive this discount.
Small Business CGT Concessions
Small business CGT concessions are four separate concessions available to eligible small businesses that can dramatically reduce or eliminate CGT on the disposal of active business assets.
Basic Eligibility Conditions
To access any of the four concessions, you must satisfy either the small business entity test (aggregated annual turnover less than $2 million) or the maximum net asset value test (net value of assets does not exceed $6 million). The asset being sold must also be an active asset used in the course of carrying on a business.
The Four Small Business CGT Concessions
1. The 15-Year Exemption – The most powerful of the four. If you have continuously owned an active asset for at least 15 years, are 55 or older (or permanently incapacitated), and are retiring or winding up the business, the entire capital gain is exempt from CGT. Zero tax.
2. The 50% Active Asset Reduction – Available on top of the general 50% discount, this reduces the remaining capital gain by a further 50%. Combined with the individual 50% discount, only 25% of the original gain is taxable.
3. The Retirement Exemption – Up to $500,000 of capital gains from the sale of active business assets can be exempt from CGT (lifetime cap). If you are under 55, the exempt amount must be contributed to superannuation. Read our guide on superannuation contribution tax deductions to understand how this interacts with super contributions.
4. The Rollover Concession – Allows you to defer a capital gain for up to two years if you intend to acquire a replacement asset or incur expenditure on capital improvements to an existing active asset.
How to Reduce Capital Gains Tax in Australia
- Time the sale strategically. Delaying a sale until after 30 June defers the tax by a full year.
- Offset gains with losses. Capital losses from other assets can be used to offset capital gains in the same year.
- Hold assets for more than 12 months. The 50% discount halves the taxable gain.
- Contribute to superannuation. Increasing concessional super contributions in the year of a sale reduces your taxable income.
- Sell through the right entity. Individuals and trusts receive the 50% CGT discount; companies do not. See our guide on Sole Trader vs Company vs Trust for how structure affects CGT outcomes.
- Use an SMSF in pension phase. Assets held inside a self managed super fund in pension phase are entirely exempt from CGT. Learn more about SMSF property investment.
Common CGT Mistakes Small Business Owners Make
Not keeping proper cost base records. The cost base includes not just the purchase price but also acquisition costs, capital improvements, and selling costs. Businesses that do not keep records end up paying more tax than they owe.
Assuming CGT only applies on sale of property. CGT applies to goodwill, intellectual property, customer lists, and other intangible business assets too.
Not planning the structure before selling. The entity you sell from and the way the transaction is structured cannot always be changed at the last minute. Planning 12 to 24 months before a sale is far more effective than trying to minimise tax after heads of agreement are signed.
Missing the 15-year exemption by a short period. If you are at year 14 and considering selling, waiting one more year could mean zero CGT.
Frequently Asked Questions
What is capital gains tax in Australia? Capital gains tax is the tax on the profit from selling an asset. It is not a separate tax rate but is added to your income and taxed at your marginal rate. Individuals who hold an asset for more than 12 months receive a 50% discount on the gain.
How much is capital gains tax in Australia? There is no fixed CGT rate. The gain is taxed at your marginal income tax rate, which ranges from 19% to 45% depending on your total taxable income. For small businesses selling active assets, the four small business CGT concessions can legally reduce the tax to zero.
What are the four small business CGT concessions? The 15-year exemption, the 50% active asset reduction, the retirement exemption (up to $500,000 lifetime), and the rollover concession. Each has eligibility conditions and they can be applied in combination.
Thinking about selling your business or a major asset? Book a free consultation with our Chartered Accountants: call 02 9980 1556 or visit verusaa.com.au. 973 Pacific Hwy, Pymble NSW 2073. Monday to Friday, 9am to 5pm.
