How Capital Gains Tax Works on Shares and ETFs in Australia (And What Changes From 2027)
If you sold shares, ETF units or crypto this year, the tax treatment isn't the same as your salary — and depending on when you sell, it might not be the same next year either. From 1 July 2027, the 50% capital gains tax discount that most investors rely on is being replaced with a new system, and according to the ATO, it's already law.
A lot of the clients who come through our Rochedale South office assume capital gains tax only applies to property. It doesn't. Shares, ETF units, managed fund units and crypto assets are all “CGT assets” under Australian tax law, and selling any of them can trigger a capital gain or capital loss that gets added to your tax return for the year you sold — not the year you originally bought.
This guide covers how CGT actually gets calculated on shares and ETFs under the rules that still apply for the 2026–27 income year, where crypto fits in, what records the ATO expects you to hold onto, and exactly what changes once the new rules start in mid-2027. Published 11 September 2026, reflecting ATO guidance and legislated changes current as at this date.
In this guide:
Do I Actually Pay CGT When I Sell Shares or ETFs?
Yes, in almost every case. When you sell shares, ETF units or units in a managed fund, that sale is what the ATO calls a CGT event — specifically CGT event A1. The event happens on the date you enter the contract to sell, not the date the sale settles, which matters if you're selling right at the end of a financial year and trying to work out which tax return the gain belongs on.
If the sale price is higher than what the asset cost you (your cost base, covered below), you've made a capital gain. If it's lower, you've made a capital loss. Capital losses can only be offset against capital gains — not against your salary or business income — but if you don't have any gains to offset in a given year, the loss simply carries forward indefinitely until you do.
There's one exception worth flagging: if you're buying and selling shares so frequently, and with such a clear profit-making purpose, that the ATO would consider you to be carrying on a business of share trading, your shares are treated as trading stock and the profits are ordinary income, not capital gains. That's genuinely rare for everyday investors — most people trading through CommSec, SelfWealth or a similar platform a few times a year are firmly in CGT territory, not running a trading business.
How Is CGT Calculated? The Cost Base Explained
The capital gain isn't just “sale price minus purchase price.” The ATO uses something called a cost base, built from five elements added together.
Cost base element | What it includes |
|---|---|
1. Money paid | The purchase price of the shares or units, based on what you actually paid |
2. Incidental costs | Brokerage on both the purchase and the sale, plus adviser or accountant fees directly tied to the transaction |
3. Non-deductible ownership costs | Costs of holding the investment that you couldn't otherwise claim as a tax deduction (rare for listed shares) |
4. Capital improvements | Costs that increase the value of the asset (uncommon for shares, more relevant for some unlisted investments) |
5. Title costs | Legal costs to defend your ownership of the asset, if that ever comes up |
For most share and ETF investors, only the first two elements matter in practice: what you paid for the units, and the brokerage on the way in and the way out.
Say you bought 500 BHP shares at $40 each in March 2024, paying $20,000 plus $19.95 brokerage. In August 2026 you sell the lot at $55 each, for $27,500, and pay another $19.95 in brokerage. Your cost base is $20,000 + $19.95 + $19.95 = $20,039.90. Your capital proceeds are $27,500. That gives you a capital gain of $7,460.10 before any discount is applied.
What Is the 50% CGT Discount, and Do I Qualify?
If you're an Australian resident individual and you held the asset for at least 12 months before selling it — not counting the day you bought it or the day you sold it — you can reduce your capital gain by 50% before it's added to your taxable income, under the ATO's CGT discount rules. Trusts get the same 50% discount; complying super funds get 33.33%; companies don't get any discount at all.
Going back to the BHP example: the shares were bought in March 2024 and sold in August 2026, comfortably past the 12-month mark, so the $7,460.10 gain is discounted by half. Only $3,730.05 gets added to that year's taxable income, taxed at your marginal rate.
The 12-month rule is tested strictly on the calendar, and the ATO doesn't round in your favour. If you're 364 days into holding an asset and tempted to sell because you need the cash, it's worth checking whether waiting a few more days changes your tax bill meaningfully — sometimes it's a genuinely material difference, sometimes it isn't, and it depends entirely on your marginal tax rate and the size of the gain.
Are ETFs and Managed Funds Taxed Differently?
The CGT event on sale works exactly the same way for ETF units as it does for direct shares. Where it gets more complicated is what happens while you're still holding the units.
Most Australian ETFs and managed funds are structured as Attribution Managed Investment Trusts, or AMITs. Each year, the fund issues an annual tax statement (sometimes called an AMMA statement) that breaks your distribution down into components — assessable income, franked and unfranked dividends, foreign income, and often a “tax-deferred” or “CGT concession” amount. Only part of that distribution is included in your assessable income for the year. The rest isn't taxed immediately, but it isn't tax-free forever either — it reduces the cost base of your units instead.
In practice, that means when you eventually sell, your capital gain is usually larger than a simple purchase-price-to-sale-price comparison would suggest, because the cost base has been quietly adjusted downward every year by those tax-deferred distribution components. This is one of the most common things we find missing when a new client brings us their own DIY calculation — they've kept the purchase confirmation but not the annual tax statements, and without those, the cost base adjustment is impossible to work out accurately.
What About Crypto — Same Rules?
Broadly, yes. The ATO treats crypto assets — Bitcoin, Ethereum and most other tokens — as CGT assets in the same way as shares. Buying and holding isn't a taxable event. Selling for Australian dollars, swapping one crypto asset for another, using crypto to pay for goods or services, and even some DeFi transactions like lending or providing liquidity can each trigger a CGT event.
The one narrow exception is the personal use asset rule. If you acquired the crypto for less than $10,000 and genuinely used it to buy something for personal consumption in a short timeframe — the ATO's own example is buying concert tickets directly with crypto on the same day — any gain can be exempt from CGT. It doesn't apply if you held the crypto as an investment and only later spent some of it, and it never applies to capital losses, which can't be claimed on a personal use asset. Converting to dollars first, or spending through a card linked to a crypto wallet, generally won't qualify either.
It's also worth knowing that the ATO runs an ongoing data-matching program with Australian and international crypto exchanges, collecting over a million account records a year covering transactions back to the 2014–15 income year, and retaining that data for seven years. If you've been assuming a crypto gain is invisible because it never touched your bank account, that's a genuinely risky assumption to be making right now.
What Records Does the ATO Expect You to Keep?
The ATO's rule is straightforward: keep records of everything that affects a capital gain or loss for at least five years after the CGT event, and longer if you've carried a loss forward into a later year that's still within its own review period.
What to keep | Why it matters |
|---|---|
Purchase confirmations / contract notes | Establishes your acquisition date and the first element of your cost base |
Brokerage statements | Adds to your cost base on both the buy side and the sell side |
Annual tax statements / AMMA statements | Tracks distribution components that adjust your ETF or managed fund cost base each year |
Records of corporate actions | Share splits, bonus issues and DRP shares each create their own acquisition date and cost base |
Sale confirmations | Establishes your capital proceeds and disposal date |
One detail that trips people up: shares you receive through a dividend reinvestment plan are a separate CGT asset from your original holding, with their own purchase date and their own cost base equal to the value of the dividend that was reinvested. If you've been in a DRP for ten years, you could be sitting on dozens of separate parcels, each with a different acquisition date — which matters enormously for working out which parcels have passed the 12-month discount threshold.
What Changes From 1 July 2027?
This is the part most articles on this topic gloss over, and it's arguably the most important thing for anyone holding shares or ETFs right now. As part of the 2026–27 Federal Budget, the government legislated a replacement for the 50% CGT discount, and according to the ATO, these changes are now law.
From 1 July 2027, for capital gains made by Australian resident individuals and trusts, the flat 50% discount is being replaced with two things: cost base indexation (adjusting most elements of your cost base for inflation over the period you held the asset) and a 30% minimum effective tax rate on the resulting gain. In practice, indexation only meaningfully helps if your cost base is large relative to the gain, and the 30% floor means someone on a lower marginal tax rate — a part-time worker, a retiree drawing a small pension — could end up paying more tax on a share sale than they would under the current rules.
The one piece of good news is that this only applies to gains arising after 1 July 2027. Sell before then, and the current 50% discount rules covered in this guide still apply in full. That's led a lot of investors to ask us whether they should sell everything before the deadline purely to lock in the old rules. We'd caution against making that call on tax grounds alone — selling triggers a real, immediate tax bill on the gain you've already made, and buying back in resets your 12-month holding period from scratch. If you're close to retirement with a large unrealised gain, it's worth modelling both scenarios properly well before 30 June 2027. For most people building a long-term portfolio, the sensible move is usually to keep investing as planned and let your accountant factor the new rules into future returns.
A Worked Example: Adjusting the Cost Base for a Distribution
Here's a slightly more realistic example than a plain share purchase, because it shows why the annual tax statement matters.
Priya buys 1,000 units in an ASX-listed ETF in July 2023 for $10,200, including brokerage. Over the next three years, the fund's annual tax statements show total tax-deferred distribution components of $340 across the three years — amounts that reduced her cost base but weren't included in her assessable income at the time. By the time she sells in September 2026 for $12,500, her adjusted cost base isn't $10,200; it's $10,200 minus $340, or $9,860.
Her capital gain is $12,500 minus $9,860, which is $2,640 — not the $2,300 she'd get by (incorrectly) using the original purchase price without adjusting for those distributions. She's held the units for more than 12 months, so the 50% discount applies, and $1,320 gets added to her assessable income for the 2026–27 year. Missing that $340 adjustment would have understated her gain by $340 before the discount, and by $170 after it — small in this example, but the kind of error that compounds significantly over a decade of holding an ETF through multiple market cycles.
Common Mistakes We See With Share and ETF CGT
Treating dividend reinvestment plan shares as part of the original parcel, instead of a separate asset with its own acquisition date and cost base
Forgetting to adjust the cost base for tax-deferred or CGT-concession amounts shown on annual tax statements
Assuming a crypto-to-crypto swap isn't a taxable event because no Australian dollars changed hands — it is a CGT event
Leaving brokerage or platform fees out of the cost base on either side of the transaction
Assuming the tax-free threshold shields investment gains — it applies to your total taxable income, capital gains included, not as a separate allowance on top
Not keeping records once a platform or exchange closes down or changes ownership, which makes reconstructing a cost base years later extremely difficult
Frequently Asked Questions
Do I pay capital gains tax if I transfer shares to my spouse?
Generally, yes. Transferring shares to a spouse (outside the CGT rollover rules that can apply on a genuine relationship breakdown) is treated as a disposal at market value, which can trigger CGT for you even though no cash changed hands. It's worth getting advice before doing this purely to “share” investment income for tax purposes.
What happens if I make a capital loss?
A capital loss can only be offset against capital gains, not against your salary, rental income or business profits. If you don't have gains to use it against in the year it occurs, it carries forward and can be used against capital gains in future years — there's no time limit on how long you can carry it forward.
Is there CGT on shares I inherited?
Not immediately. Generally, you inherit the deceased's cost base and acquisition date (with some adjustments depending on when they originally acquired the asset), and CGT is only triggered when you eventually sell. This area has enough exceptions that it's worth a specific conversation with your accountant if you've recently inherited an investment portfolio.
Do I need to report every trade if I use a micro-investing or robo-advice app?
Yes. Every disposal — including automatic rebalancing trades some robo-advice platforms make on your behalf — is potentially a CGT event, even if the dollar amounts are small. Most platforms provide an annual tax statement summarising gains and losses, but you're still responsible for reporting it correctly.
Does the tax-free threshold reduce my capital gains tax?
Not as a separate amount. Your net capital gain (after the discount) is added to your other taxable income, and the tax-free threshold and marginal rates apply to that combined total. If your capital gain pushes your total income over the threshold, the whole picture changes, not just the gain in isolation.
Should I sell everything before 1 July 2027 to lock in the current 50% discount?
Not automatically. Selling early crystallises a real tax bill now on gains you might otherwise have deferred, and it resets your 12-month holding period on anything you buy back. For most everyday investors, it makes more sense to keep investing as planned and let the new rules apply to future gains. If you're holding a large unrealised gain and already planning to sell in the next few years anyway, it's worth running the numbers with your accountant well before the 2027 deadline rather than deciding on budget headlines alone.
Selling Shares, ETFs or Crypto This Financial Year?
Our team can help you work out your cost base correctly and lodge with confidence. Start your online tax return today, or try our tax calculator for a quick estimate. For a more complex portfolio, see our fees or learn more about us.
Baron Tax & Accounting — 758 Underwood Road, Rochedale South QLD 4123 | +61 7 3706 3147 | 1300 087 213 | info@baronaccounting.com | Mon–Fri 9:30am–5:00pm
This article provides general information only and does not constitute personal tax or financial advice. It does not take into account your objectives, financial situation or needs. Tax rules change and apply differently to each person's circumstances. Before acting, please seek advice from a registered tax agent. Baron Tax & Accounting accepts no liability for any loss arising from reliance on this article. Source references: ATO (ato.gov.au) and other Australian government agencies, current as at the date of publication.
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