What is the Capital Gains Tax Discount?

Who actually qualifies

The discount isn't a flat rule that applies the same way to everyone, it depends on who owns the asset. See capital gains tax for how the underlying gain is worked out in the first place.

Beyond entity type, three conditions all need to be met: you need to have been an Australian tax resident at the time of the CGT event, you need to have held the asset for at least 12 months, and the profit needs to be a genuine capital gain rather than income from carrying on a business of trading the asset. Companies get no discount at all, regardless of how long they've held the asset.

The 12-month holding period rule

The clock starts the day after you acquired the asset and runs to the day of the CGT event, not the day you decide to sell. For property, the CGT event is the contract date, not settlement, a trap that catches people out. Sign a contract at day 364 and the discount is gone, even though settlement might happen six weeks later, comfortably past the 12-month mark. For shares, it's the trade date that counts, not the day the trade settles in your account.

Worked example

You buy 1,000 shares at $10 each, a $10,000 cost base. Fourteen months later you sell at $16 each, $16,000 in proceeds. Your capital gain is $6,000. With the 50% discount applied, only $3,000 counts as your discounted, taxable gain.

In this example, the discount saves $975 in tax, simply for holding the shares past the 12-month mark.

Major reform: what changes from 1 July 2027

This is the part anyone researching the CGT discount right now needs to know. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and for gains accruing after 1 July 2027, it replaces the 50% CGT discount with cost base indexation, adjusting what you paid in line with CPI, plus a 30% minimum tax rate applied to the resulting real gain.

If your marginal rate is already above 30%, the minimum rate changes little for you. If it's below 30%, a top-up applies to bring the tax on the gain up to that floor. The reform is prospective only, gains that accrued before 1 July 2027 keep the 50% discount treatment no matter when you eventually sell. For an asset you already hold when the rules change, the gain gets apportioned between the pre- and post-2027 periods, using either quoted market prices at 1 July 2027 or an ATO apportionment formula.

A few carve-outs are worth knowing. People receiving means-tested income support, like the Age Pension or JobSeeker, in the year they realise the gain are exempt from the 30% minimum tax. New residential dwellings can choose between the old 50% discount or the new rules, affordable housing keeps its existing 60% discount, small business CGT concessions are unchanged, and your main residence remains CGT-exempt regardless. This is the same Act that restricts negative gearing for established residential property bought after 12 May 2026, the two reforms were legislated together and are meant to be read as a pair.

Three common misconceptions

First, the discount applies to the gain, not the full sale price. Sell a property for $800,000 that you bought for $500,000 and your gain is $300,000, the discount halves that $300,000, not the $800,000 sale figure. Second, not every entity gets 50%, super funds get 33.33% and companies get nothing at all, so the discount you'll actually receive depends on how you hold the asset. Third, holding an asset for 12 months doesn't automatically guarantee the discount, property uses the contract date rather than settlement, and you need to be an eligible entity type in the first place.