CGT on Shares and ETFs: How Capital Gains Tax Works in Australia

The capital gain is the capital proceeds from the sale less the cost base. The cost base includes the purchase price plus incidental costs such as brokerage on both the buy and the sell.

If the proceeds are less than the reduced cost base, the result is a capital loss. Only the net capital gain for the year, after losses and any discount, is added to assessable income.

An Australian resident individual who holds shares or ETF units for at least 12 months before the CGT event can reduce the resulting capital gain by 50%. The day of acquisition and the day of the CGT event are both excluded when counting the 12 months.

Complying super funds receive a 33.33% discount instead, and companies cannot use the discount at all.

Capital losses are subtracted from capital gains before the discount is applied, so a loss reduces the gain that the 50% is calculated on.

The discount applies to CGT events up to 30 June 2027. After that date the 2027 reform rules apply.

A capital loss can be offset only against capital gains, not against salary, wages or other income.

If total capital losses for the year are greater than total capital gains, the excess is a net capital loss that carries forward indefinitely to later years. There is no time limit.

A loss can only be claimed on an asset that has actually been disposed of. A paper loss on shares still held cannot be claimed.

Capital losses must be applied before the CGT discount, and where a person has both discountable and non-discountable gains, the ATO applies losses to non-discount gains first.

When shares in the same company were bought at different times and prices, the ATO expects the specific parcel being sold to be identified at or before the time of sale, because that parcel's cost base and acquisition date determine the gain or loss and whether the discount applies.

A broker contract note usually shows only the total quantity sold, not which parcel, so a contemporaneous record of the parcel selected is needed.

Where parcels cannot be distinguished, a first-in-first-out basis is commonly used.

Under a dividend reinvestment plan the cash dividend is used to buy additional shares instead of being paid out.

The ATO treats this as two events: the dividend is assessable income, including any franking credits, even though no cash was received, and the reinvested amount is treated as the purchase of new shares.

Each DRP allocation is a separate parcel with its own acquisition date and its own cost base equal to the dividend amount applied. A fresh 12-month clock for the discount starts for each parcel.

Most ASX-listed ETFs are attribution managed investment trusts (AMITs). Each year the fund issues an annual tax statement, the AMMA statement, that attributes income to unit holders by its tax character, including Australian dividends, franking credits, foreign income and capital gains.

Because the fund buys and sells assets as it tracks its index, it can attribute capital gains to unit holders even in a year when the units themselves were not sold.

Where the cash distributed differs from the taxable amount attributed, the AMMA statement records an AMIT cost base net amount that adjusts the unit cost base. A downward adjustment, the common case, lowers the cost base and increases the capital gain on a later sale. An upward adjustment raises the cost base.

These adjustments are not taxed in the year they appear. They change the gain calculated when the units are eventually sold, which is why the ATO expects them to be tracked each year.

For CGT events from 1 July 2027, the 50% CGT discount is replaced by cost base indexation using the consumer price index, plus a 30% minimum tax on net capital gains.

This change was legislated by the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and applies across all CGT assets, including shares and ETF units.

Gains that accrued before that date keep the existing rules. The AMIT adjusted cost base remains the figure the gain is calculated from either way.

Example only. An Australian resident buys 1,000 units in an ETF and holds them for more than 12 months. Over that period the annual AMMA statements show a total downward cost base adjustment, which lowers the cost base.

On sale, the capital proceeds less the adjusted cost base gives the capital gain. Any capital losses for the year are subtracted first, then the 50% discount is applied to what remains because the units were held more than 12 months and the CGT event is before 1 July 2027.

The discounted net capital gain is added to assessable income and taxed at the person's marginal rate. Specific figures are left out here because they depend on the individual's prices, costs and marginal rate.

Do I pay CGT when I sell an ETF?

Yes. Selling ETF units is a CGT event. The gain is the sale proceeds less the cost base, adjusted for any AMIT cost base changes on the AMMA statements.

Does the 50% discount apply to shares held over 12 months?

For Australian resident individuals, yes, for CGT events up to 30 June 2027. From 1 July 2027 the discount is replaced by cost base indexation and a 30% minimum tax.

Can I use a capital loss on shares to reduce my salary?

No. Capital losses offset capital gains only. A net capital loss carries forward indefinitely to later years.

Are reinvested dividends taxed?

Yes. A reinvested dividend is assessable income, including franking credits, and the reinvested amount becomes the cost base of the new shares.

What is an AMMA statement?

The annual tax statement an AMIT ETF issues, showing the income attributed to the unit holder by tax character and any cost base adjustment for the year.