The CGT discount is the most valuable capital gains tax concession available to ordinary Australian investors. If you hold an eligible asset for more than 12 months before selling, you generally pay tax on only half the gain. For a higher-income investor, that can roughly halve the tax bill on an investment profit — which is why the 12-month holding period is one of the most important dates in personal investing.
Try it: the Capital Gains Tax Calculator shows the difference the 12-month discount makes.
This guide sits under our pillar, capital gains tax in Australia. It explains who gets the discount, exactly how the 12-month rule works, and how the rate differs for super funds.
What the CGT discount does
When you make a capital gain, the discount reduces the portion of that gain that is added to your taxable income. It does not change your tax rate — your net capital gain is still taxed at your marginal tax rate — it simply shrinks the amount that gets taxed.
The discount rates are:
| Who holds the asset | CGT discount (assets held >12 months) |
|---|---|
| Individuals and trusts | 50% |
| Complying super funds (incl. SMSFs in accumulation) | 33.3% |
| Assets sold in SMSF pension (retirement) phase | Effectively nil CGT |
| Companies | No discount |
So a $20,000 gain for an individual becomes a $10,000 net capital gain. The same gain inside a super fund in accumulation becomes about $13,340 (a 33.3% discount). Inside an SMSF that is fully in pension phase, it can be effectively tax-free. See CGT and SMSF / super for how the super rates work in practice.
The 12-month rule
To qualify for the discount you must have owned the asset for more than 12 months — genuinely more than a year, not exactly a year.
Two points catch people out:
- The clock starts the day after acquisition. If you bought on 1 March, the discount is available for a CGT event on or after 2 March the following year.
- The CGT event date is usually the contract date. For shares that is the trade date; for property it is the date you sign the contract of sale, not settlement.
Because the discount applies to the whole eligible gain, the difference between selling at 11 months and 13 months can be enormous. It is often worth deferring a sale by a few weeks to cross the 12-month line — provided the market and your own circumstances allow.
Who can claim it
- Individuals (Australian residents) — 50%.
- Trusts — 50%, with the discount generally flowing through to beneficiaries.
- Complying super funds — 33.3%.
- Companies — no discount at all, which is a key reason many investors hold long-term assets personally or in trusts rather than companies.
Foreign and temporary residents have had the discount removed or restricted for periods of non-residency, so if you have lived overseas while owning an asset, check the current rules at ato.gov.au.
Worked example
Marcus, an individual, buys $50,000 of shares. Fifteen months later he sells them for $74,000. Ignoring brokerage for simplicity:
| Item | Amount |
|---|---|
| Capital proceeds | $74,000 |
| Cost base | $50,000 |
| Gross capital gain | $24,000 |
| 50% discount (held >12 months) | −$12,000 |
| Net capital gain added to income | $12,000 |
Marcus adds $12,000 to his assessable income and pays tax on it at his marginal tax rate.
Now compare the same gain if Marcus had sold at 11 months: the full $24,000 would be taxable — double the amount. And if the same shares had been held inside his super fund in accumulation phase, the 33.3% discount would leave a net gain of about $16,008; in pension phase, the gain could be effectively tax-free.
How losses interact with the discount
Capital losses are applied to your gains before the discount. Because the discount then halves whatever gain remains, you generally get the best result by offsetting losses against your non-discounted gains first (assets held under 12 months), preserving more of the discounted gains. This ordering choice is explained in capital losses and carry-forward.
Strategies around the discount
- Watch the 12-month mark. Track your acquisition dates so you never sell a profitable asset just before it qualifies.
- Consider who owns the asset. Individuals and trusts get 50%; companies get nothing.
- Think about the year of sale. The discounted gain is still taxed at your marginal rate, so selling in a low-income year (for example, early retirement) can reduce the tax further — see how to reduce CGT legally.
- Use super’s concessional rates where appropriate; long-term assets inside super are taxed more lightly.
Why the discount exists
The discount replaced the older “indexation” method, which adjusted an asset’s cost base for inflation before taxing the gain. The idea behind both approaches is the same: not all of a long-term gain is a real increase in wealth — some of it is just inflation. The 50% discount is a rough-and-ready way of recognising that, while keeping the calculation simple. It is also a deliberate incentive to hold assets for the long term rather than trade in and out, which is why the 12-month threshold is so central. For most investors this is a feature worth leaning into: patient, long-term holding is both good investing practice and the path to the most favourable tax treatment.
For assets acquired before 21 September 1999, the old indexation method may still be available as an alternative to the discount, and you can generally choose whichever gives the lower gain. In practice, for anything bought this century, the 50% discount is the relevant rule.
Common pitfalls
- Selling at exactly 12 months — you need more than 12 months.
- Using the settlement date for property instead of the contract date.
- Assuming companies get the discount — they do not.
- Forgetting the discount reduces the gain, not the rate — a large discounted gain can still push you into a higher bracket for the year.
For the mechanics of calculating a discounted gain end to end, see our CGT calculator guide, and for asset-specific detail, CGT on shares and CGT on investment property.
This article is general information only and not financial or tax advice; consider your own circumstances and speak to a licensed adviser or the ATO before acting.