How to Calculate Capital Gains Tax on Shares in Australia: Complete 2026 Guide

If you've sold shares on the ASX this financial year, you probably owe the ATO some capital gains tax. The good news is that CGT on shares is more straightforward than most people think. The bad news is that most people get it wrong anyway, usually because they don't understand cost base, use the wrong method, or forget about the discount.

This guide walks you through exactly how CGT works on Australian shares, with real numbers and real examples.

What Is Capital Gains Tax?

Capital gains tax isn't a separate tax. It's part of your income tax. When you sell shares for more than you paid, the profit (the "capital gain") gets added to your taxable income for the year. You then pay tax on that gain at your marginal tax rate.

A few key points up front:

• CGT only applies when you sell (or otherwise dispose of) shares. Unrealised gains don't count.
• You report CGT in the financial year the sale happens (the contract date, not the settlement date).
• If you sell at a loss, that's a capital loss, and you can use it to offset gains.
• There's a 50% discount if you held the shares for more than 12 months (for individuals and trusts).

When Does a CGT Event Happen?

The obvious one is selling shares through your broker. But CGT events also include:

• Takeovers and buybacks where you receive cash for your shares
• Demergers where a company splits (the cost base gets apportioned)
• In-specie transfers (e.g., transferring shares into or out of your SMSF)
• Shares becoming worthless (e.g., a company goes into liquidation and is delisted)
• Gifts of shares to someone else

Each of these triggers a CGT calculation, even if no money hits your bank account.

Understanding Your Cost Base

Your cost base is what you paid for the shares, plus certain associated costs. Getting this right is critical because the ATO uses it to determine your gain or loss.

The cost base includes:

Important: Stamp duty on share purchases was abolished in all Australian states by 2001, so you won't have that to worry about for anything bought recently.

For DRP (Dividend Reinvestment Plan) shares, your cost base is the price you "paid" through the reinvestment, which appears on your DRP statement. A lot of people forget to include DRP parcels. Don't be one of them.

Step-by-Step CGT Calculation: A Worked Example

Let's say you bought BHP shares in two separate parcels and then sold some.

The Purchases

The Sale

On 20 February 2026, you sell 120 shares at $55.00 each.

• Sale proceeds: 120 x $55.00 = $6,600.00
• Brokerage on sale: $19.95
• Net sale proceeds: $6,580.05

Applying the FIFO Method

Under the FIFO (First In, First Out) method, the shares you bought first are treated as the shares you sold first. The ATO doesn't mandate FIFO, but it's the most commonly used method for individuals and the one most brokers and tax software default to.

Parcel 1: You sell all 100 shares from the March 2024 purchase.

• Cost base: $4,219.95 (including purchase brokerage)
• Portion of sale brokerage allocated: $19.95 x (100/120) = $16.63
• Total cost base for this parcel: $4,219.95 + $16.63 = $4,236.58
• Proceeds from this parcel: 100 x $55.00 = $5,500.00
• Capital gain on Parcel 1: $5,500.00 - $4,236.58 = $1,263.42
• Held for more than 12 months? Yes (March 2024 to February 2026). 50% discount applies.
• Discounted gain: $1,263.42 x 50% = $631.71

Parcel 2: You sell 20 of the 50 shares from the September 2024 purchase.

• Cost base per share: $2,294.95 / 50 = $45.8990
• Cost base for 20 shares: 20 x $45.8990 = $917.98
• Portion of sale brokerage allocated: $19.95 x (20/120) = $3.33
• Total cost base for this parcel: $917.98 + $3.33 = $921.31
• Proceeds from this parcel: 20 x $55.00 = $1,100.00
• Capital gain on Parcel 2: $1,100.00 - $921.31 = $178.69
• Held for more than 12 months? Yes (September 2024 to February 2026). 50% discount applies.
• Discounted gain: $178.69 x 50% = $89.35

Total Capital Gain

• Total discounted capital gain: $631.71 + $89.35 = $721.06
• This amount gets added to your taxable income for 2025-26.

If your marginal tax rate is 32.5% (plus 2% Medicare levy), your actual tax on this gain would be roughly $249.

The FIFO Method in Detail

FIFO stands for First In, First Out. When you sell shares, you're treated as selling the oldest ones first. Here's why this matters.

Say you bought CBA shares at three different times:

If you sell 60 shares in March 2026, FIFO means you sell:

• All 50 from Parcel 1 (bought Jan 2023)
• 10 from Parcel 2 (bought Jul 2024)

This actually works in your favour here because the oldest parcels have the lowest cost base, which means a bigger gain, but they also qualify for the 50% discount. For most long-term investors, FIFO with the discount produces a better outcome than selling newer parcels without the discount.

Other Methods

You're not locked into FIFO. The ATO allows you to choose which parcels you sell, as long as you can specifically identify them. Some investors use the "maximum cost base" method to minimise gains, or the "minimum cost base" method if they want to trigger gains in a low-income year.

In practice, most people stick with FIFO because it's simple and defensible.

The 50% CGT Discount

If you're an individual (not a company) and you held the shares for at least 12 months and one day before selling, you only pay tax on half the capital gain.

The rules:

• Individuals: 50% discount
• Complying super funds: 33.33% discount
• Companies: No discount at all
• Trusts: 50% discount (passed through to individual beneficiaries)

The 12-month clock starts the day after you acquired the shares. So if you bought on 1 March 2025, you need to sell on or after 2 March 2026 to get the discount.

Warning: The discount applies to the gain, not the proceeds. And you must apply any capital losses before applying the discount.

Order of Calculation

1. Calculate total capital gains for the year
2. Subtract any capital losses (current year and carried forward)
3. Apply the 50% discount to any remaining gains on assets held more than 12 months
4. Add the result to your taxable income

Getting the order wrong is one of the most common mistakes.

Capital Losses and How to Use Them

Capital losses are the silver lining of bad investments. If you sell shares for less than your cost base, the resulting capital loss can be offset against capital gains.

Key rules:

• Capital losses can only offset capital gains. You can't deduct them against your salary or other income.
• If your losses exceed your gains in a given year, the excess carries forward indefinitely.
• You must apply losses before applying the 50% discount.
• You choose which gains to offset first. It's usually best to offset gains that don't qualify for the discount, since those are taxed at the full rate.

Example

You have:

• $5,000 capital gain on CSL shares (held 18 months, discount eligible)
• $2,000 capital gain on TLS shares (held 6 months, no discount)
• $3,000 capital loss on a speculative mining stock

Smart approach: Apply the $3,000 loss against the $2,000 short-term TLS gain first, leaving $1,000 loss remaining. Apply the remaining $1,000 loss against the $5,000 CSL gain, leaving $4,000. Then apply the 50% discount: $4,000 x 50% = $2,000 taxable gain.

If you'd applied the loss against CSL first: $5,000 - $3,000 = $2,000 x 50% = $1,000 from CSL, plus $2,000 from TLS = $3,000 taxable gain.

The first approach saves you tax on $1,000 of gains. The ATO lets you choose, so choose wisely.

CGT for Different Entity Types

How much you pay depends on what type of entity holds the shares.

Individuals

Your capital gains get added to your other taxable income and taxed at your marginal rate. For 2025-26:

Plus 2% Medicare levy on top.

Self-Managed Super Funds (SMSFs)

Capital gains are taxed at 15% in the accumulation phase. With the 33.33% discount for assets held over 12 months, the effective rate drops to 10%. In the pension phase, the rate is 0%.

Companies

A flat 25% or 30% rate (depending on the company type), with no CGT discount.

Trusts

The trust itself isn't taxed. Capital gains flow through to beneficiaries, who can then apply the 50% discount if they're individuals.

Tips to Reduce Your CGT Legally

1. Hold for at least 12 months to qualify for the 50% discount. This is the single biggest CGT saver for most investors.

2. Time your sales. If you're close to a lower tax bracket, consider splitting sales across two financial years.

3. Harvest losses before 30 June. Sell underperforming shares to crystallise losses that offset your gains. Just be aware of the wash sale rule (see our tax loss harvesting guide).

4. Use the right loss offset order. Offset losses against non-discounted gains first, as shown above.

5. Keep impeccable records. The ATO can ask for your cost base records going back decades. If you can't prove your cost base, the ATO may deem it to be zero, meaning you pay CGT on the full sale price.

6. Consider contributing to super instead of investing personally, where gains are taxed at just 15% (or 10% with the discount).

7. Don't forget DRP parcels. Each dividend reinvestment creates a new parcel with its own cost base and acquisition date.

What Records Do You Need to Keep?

The ATO requires you to keep records for five years after you sell the shares (or five years after you lodge the tax return that includes the capital gain, whichever is later). But since you need the original purchase records to calculate the cost base, you effectively need to keep records for as long as you hold the shares, plus five years.

You need:

• Contract notes or trade confirmations for every buy and sell
• DRP statements showing reinvestment prices
• Records of any corporate actions (demergers, mergers, capital returns)
• Brokerage statements
• Your calculations showing how you worked out the gain or loss

Let SavvyPortfolio Handle the Maths

Doing all of this manually is tedious and error-prone, especially if you've been investing for years and have dozens of parcels across multiple stocks.

SavvyPortfolio automatically calculates your CGT using the FIFO method, tracks your cost base including brokerage, applies the 50% discount where eligible, and keeps a running tally of your realised and unrealised gains. Just upload your broker CSV and the numbers are done for you.

No spreadsheet gymnastics required.