When you sell shares for more than they cost you, the profit is a capital gain, and capital gains tax (CGT) is the tax you pay on it. CGT is not a separate tax. Your net capital gain for the year is added to your income and taxed at your marginal rate (ATO: Capital gains tax).
When CGT applies
A "CGT event" happens when you dispose of shares, usually by selling them. Simply holding shares, or watching the price rise, is not a CGT event. You only have a gain or loss to report once you sell. The date that counts is the contract (trade) date, not the settlement date.
How the gain is worked out
For each parcel of shares you sell:
- Your cost base is what you paid to buy them plus the incidental costs of buying and selling, including brokerage on both the purchase and the sale (ATO: How to calculate your CGT).
- Your capital proceeds are what you received for them.
- Your capital gain is the proceeds minus the cost base. If the cost base is higher, you have a capital loss instead.
For example: you buy 100 shares for $5,000 plus $10 brokerage, and later sell them for $7,000 with another $10 brokerage. Your cost base is $5,020 ($5,000 + $10 + $10), your proceeds are $7,000, so your capital gain is $1,980. Held for more than 12 months, the 50% discount means you are taxed on $990 of it.
The 50% discount
If you are an individual and held the shares for more than 12 months, you generally pay tax on only half the gain. Held for 12 months or less, the whole gain is taxable. There is more in our guide to the 50% CGT discount.
Losses reduce the tax
A capital loss is not wasted. It offsets your capital gains, and any unused loss carries forward to future years. Losses are applied before the 50% discount, which matters for how much tax you pay. See how capital losses work.
Which shares you sold
If you bought the same share at different times and prices, you choose which parcels you sold. Many people use first in, first out (FIFO), but you can pick the parcels that give the best result. The parcel you match changes both the cost base and whether the 12-month discount applies.
What a price screen cannot show
A broker statement does not show everything CGT needs. Dividend reinvestment (DRP) adds small parcels at different prices. ETFs and managed funds issue AMIT cost-base adjustments (see our guide to CGT on ETFs). Corporate actions like splits, mergers and returns of capital change your cost base. These need to be added by hand, by you or your accountant.
At tax time
Work out the gain or loss on each parcel, apply your losses, then the discount, and report the net capital gain in your return. CGT Mate does this part for you: paste or upload your CommSec, SelfWealth or Stake trades and it produces a parcel-by-parcel schedule and a CSV, entirely in your browser.