Tax when you sell shares: a capital gain, worked through
When you sell shares you hold as an investor, a profit is a capital gain and a loss is a capital loss, and both go in your tax return. Capital gains tax is part of your income tax, not a separate tax. If you are an Australian resident and owned the shares for at least 12 months, you can generally reduce the gain by 50%.
General information, not tax advice. The ATO notes that changes to capital gains tax announced in the 2026–27 Federal Budget don’t apply to Tax Time 2026. Check the current rules on the ATO’s capital gains tax pages, and ask a registered tax agent about your own return.
Selling is the most common way a capital gains tax event happens to shares, and the one this page follows. The idea is simple: what you received, less what the shares cost you, is your gain or loss. The detail is in what counts as cost, when the discount applies, and how losses are used.
When CGT applies, and when it does not
Besides a sale, the ATO lists other events that can trigger CGT on shares, among them accepting a company’s offer to buy back your shares, a takeover or merger of a company you own shares in, and shares declared worthless by a liquidator or administrator.
CGT does not apply to dividends, which are taxed as ordinary income. Nor does it apply to profits on shares if you are carrying on a business of share trading; those are taxed as ordinary business income.
Investor or trader
Whether you are carrying on a business of share trading depends on facts the ATO and the courts weigh, including the nature and purpose of your activities, their repetition, volume and regularity, whether they are organised in a business-like way, and the capital involved. An intention to make a profit is not, on its own, enough.
| Share investor | Share trader | |
|---|---|---|
| Profit on a sale | Subject to CGT | Assessable as ordinary income |
| Loss on a sale | Offsets capital gains, now or carried forward; not other income | Deductible against income |
| Purchase price | Counted when the shares are sold | Deductible in the year incurred |
| Brokerage and other transaction costs | Counted when the shares are sold | Deductible in the year incurred |
| Dividends | Assessable income | Assessable income |
Working out the gain
The ATO sets out the steps. Work out your capital proceeds, which is what you received. Work out your cost base, which is what the shares cost you plus certain costs of acquiring, holding and disposing of them. Subtract one from the other. Repeat for each CGT event in the year, subtract capital losses from capital gains, and then apply any discount.
Brokerage belongs in the cost base. The ATO’s list of incidental costs includes payments for the services of a broker, both when you acquire an asset and when the CGT event happens.
A sale after fourteen months
An Australian resident investor buys a parcel of shares for $4,000 and pays $10 brokerage. Fourteen months later she sells the parcel for $5,000 and pays $10 brokerage. Earlier the same year she sold other shares at a capital loss of $300. She has no other gains or losses. The figures are made up; the steps are the ATO’s.
| Step | Amount |
|---|---|
| Capital proceeds from the sale | $5,000 |
| Less cost base: purchase price | −$4,000 |
| Less cost base: brokerage on the purchase | −$10 |
| Less cost base: brokerage on the sale | −$10 |
| Capital gain on this parcel | $980 |
| Less the capital loss from the other sale | −$300 |
| Gain after losses | $680 |
| Less the 50% CGT discount (held 12 months or more) | −$340 |
| Net capital gain for the tax return | $340 |
Had she sold after six months instead, no discount would apply and the net capital gain would be $680. Either way the amount is taxed at her individual income tax rate, as in the ATO’s own example.
The order matters. The ATO says that capital losses come off your capital gains before the discount is applied.
The 50% discount
Under current rules, you can reduce a capital gain by 50% if you owned the asset for at least 12 months and you are an Australian resident for tax purposes. The ATO notes that changes announced in the 2026–27 Federal Budget don’t apply to Tax Time 2026. In counting the 12 months, the ATO says to exclude both the day you acquired the asset and the day of the CGT event.
There are exclusions. Foreign and temporary residents can’t use the full discount on gains made after 8 May 2012, although an apportioned discount may apply for a period of Australian residency. Companies can’t use the discount at all, and complying super funds use a discount of 33.33% rather than 50%.
Capital losses
A capital loss offsets capital gains in the same year. If your losses are larger than your gains, the difference is a net capital loss, which you can carry forward to later years with no time limit. You can’t deduct a capital loss from your other income, such as wages. If some of your gains are not eligible for the discount, the ATO says to subtract losses from those gains first, which gives the lowest tax payable.
The ATO stresses that it is important to include capital losses in your tax return.
The records to keep
Most of what you need comes from the company, the fund manager or your broker. The ATO lists:
- the date of purchase and the purchase amount;
- the sale price, if you sell;
- any commissions paid to brokers when you buy or sell;
- details of any non-assessable payments, and any calls on partly paid shares;
- details of events such as share splits, consolidations, returns of capital, takeovers, mergers, demergers and bonus share issues.
Each parcel bought at a different time is a separate CGT asset with its own cost. When you sell only some of your shares in a company, you need to be able to identify which ones you sold. The ATO notes that your CHESS holding statement or issuer-sponsored statement can help you select which shares you sold and identify their cost. The trade confirmations your broker sends are worth keeping for the same reason.
The ATO also offers a CGT calculator and record keeping tool, which you can reach through myGov.