The 50% CGT discount remains available until 30 June 2027 (subject to eligibility), significant changes are to commence from 1 July 2027.
Whether you’re an investor or business owner, speaking with an experienced business accountant Melbourne like Nobel Thomas before selling an asset can help ensure you understand your tax obligations and take advantage of any available concessions.
What is the 50% CGT Discount?
Under the rules up to 30 June 2027, eligible taxpayers can generally reduce the taxable portion of a capital gain by 50%. Rather than paying tax on the full capital gain, only half is included in your tax return.
For example, if you purchased shares for $100,000 and later sold them for $180,000, your capital gain would be $80,000. Assuming you’re eligible for the discount, only $40,000 (i.e. 50%) would be included in your tax return. That amount is then taxed at your marginal tax rate. For example, if your marginal tax rate is 32%, tax payable on the $80,000 capital gain would be $12,800 ($80,000 x 50% x 32%).
Importantly, Australia does not have a separate capital gains tax rate. Instead, your net capital gain is included in your taxable income and taxed at your applicable marginal tax rate (per the example above).
Who Can Claim the Discount?
Under the current rules, the CGT discount is generally available to:
- Individuals (50% discount)
- Trusts (50% discount)
- Complying superannuation funds (one-third discount)
Companies are not entitled to a CGT discount.
To qualify, you must generally have owned the CGT asset for at least 12 months before entering into the contract to sell it.
Additional Concessions for Business Owners
If you’re selling an active business, the 50% CGT discount may only be one of several concessions available.
Australia’s small business CGT concessions may provide further tax relief where the relevant eligibility requirements are met. In some circumstances, these concessions can substantially reduce—or even eliminate—the tax payable on the sale of a business.
Because these rules are highly technical, obtaining advice from a business accountant Melbourne like Nobel Thomas before signing a sale contract is often worthwhile. Early planning can make a significant difference to the final tax outcome.
Important Changes from 1 July 2027
The Federal Government legislated significant changes to Australia’s CGT system from 1 July 2027.
From that date, the current 50% CGT discount will generally be replaced with an inflation-indexed cost base together with a 30% minimum tax rate on capital gains. The reforms apply prospectively, meaning gains that accrue before 1 July 2027 continue to receive the current treatment (50% discount if held for more than 12 months) under transitional rules. Post 1 July 2027, eligible investors in qualifying new residential builds will be able to choose between the existing CGT discount and the new rules, while the existing small business CGT concessions will continue.
As these transitional rules can be complex, seeking professional advice from a qualified accountant Melbourne, like Nobel Thomas, before selling a significant investment or business asset is more important than ever.
Plan Before You Sell
Many CGT decisions need to be made before a contract is signed. The ownership structure, timing of the sale, availability of capital losses and eligibility for concessions can all influence the final tax outcome.
Waiting until after settlement may mean valuable tax planning opportunities have already been lost.
An experienced accountant Melbourne can review your circumstances, estimate your potential tax liability and recommend strategies that comply with Australian tax law.
