How does the CGT 50% discount work for assets held over 12 months in Australia?

If you are an Australian resident individual and you hold a capital gains tax (CGT) asset for more than 12 months before selling or disposing of it, you are entitled to a 50% CGT discount. This means you only pay tax on half of the capital gain.

How the discount works:

• Calculate your capital gain (sale price minus cost base)
• Apply any capital losses to reduce the gain
• Apply the 50% discount to the remaining net capital gain
• The discounted gain is added to your assessable income and taxed at your marginal tax rate

Example:

You bought shares for A$10,000 and sold them 18 months later for A$16,000.

• Capital gain: A$16,000 - A$10,000 = A$6,000
• 50% discount: A$6,000 x 50% = A$3,000
• Only A$3,000 is added to your taxable income

Important rules:

• The 12-month period is calculated from the day after you acquired the asset to the day of the CGT event. You must hold it for at least 12 months and one day.
• The discount applies to individuals and trusts but NOT to companies
• Complying super funds receive a reduced discount of one-third (33.33%) instead of 50%
• The discount does not apply to collectables purchased for A$500 or less, or to certain other assets
• You must apply capital losses before applying the discount. Capital losses are applied against the full gain, not the discounted amount.
• The discount is not available to non-residents for CGT events occurring after 8 May 2012 on assets acquired after that date