Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is the tax you may pay on the profit from selling or otherwise disposing of certain assets.

Capital Gains Tax is not a separate tax bill with its own rate. In Australia, a capital gain is usually worked out and included in your income tax return, where it can increase the tax you need to pay.

For a small business owner, CGT often comes up when you sell a business asset, commercial property, shares, crypto assets, goodwill, a lease, or another asset that has increased in value. The Australian Taxation Office’s capital gains tax guidance is the main official starting point for current rules.

Where Capital Gains Tax (CGT) Appears

You are most likely to see CGT mentioned in:

sale contracts, settlement statements and accountant emails
tax return workpapers and year-end tax planning notes
share, managed fund and crypto transaction reports
records for selling business premises, goodwill, licences or leases
business sale documents and restructuring advice
cash budgets and forecasts where a future sale may create a tax payment

CGT does not usually appear on a normal customer invoice or Business Activity Statement (BAS). It normally becomes part of the annual tax return process, although the cash impact may still need planning well before tax time.

How Capital Gains Tax (CGT) Works In Practice

A CGT event is the point where the tax rules ask you to work out whether you made a capital gain or capital loss. The most common CGT event is selling an asset, but CGT can also be triggered when an asset is lost, destroyed, given away, cancelled or otherwise disposed of.

In simple terms, the calculation starts like this:

Capital gain = sale proceeds minus cost base

The cost base is broadly what you paid for the asset, plus certain costs connected with buying, owning or selling it. If the result is positive, you may have a capital gain. If the result is negative, you may have a capital loss.

Capital losses can generally reduce capital gains, but they cannot usually reduce ordinary income such as wages or normal business trading income. If you cannot use a capital loss this year, it may be carried forward to offset future capital gains.

Under current ATO guidance, Australian resident individuals and trusts may be eligible for the CGT discount if they owned the asset for at least 12 months. Companies cannot use the CGT discount. Some small businesses may also qualify for special CGT concessions on active business assets, so larger sales are worth checking with a registered tax agent before contracts are signed.

The 2026-27 Federal Budget announced future CGT reforms from 1 July 2027, including replacing the 50% CGT discount with an inflation-based discount and introducing a minimum 30% tax on gains. The Government’s Budget tax reform summary sets out the announcement, but the final result depends on legislation and transitional rules.

Simple Example

Mia owns a small design studio and also holds a parcel of listed shares. She bought the shares for $10,000, paid $100 brokerage, and sold them 18 months later for $13,100.

Step	Amount	What It Means
Sale proceeds	$13,100	What Mia received when she sold the shares
Cost base	$10,100	Purchase price plus brokerage
Capital gain before discounts	$3,000	Sale proceeds minus cost base
Discounted capital gain	$1,500	50% discount applied under current rules, if Mia is eligible

Mia includes the net capital gain in her tax return. The $1,500 is not the tax itself; it is the amount added to her taxable income before her final tax bill is worked out.

Why Capital Gains Tax (CGT) Matters

CGT matters because it can turn a profitable sale into a tax payment that arrives months later. If you sell an asset for a large gain and spend all the proceeds, the tax bill can become a cash flow problem.

It also matters for records. You need enough evidence to show when you acquired the asset, what you paid, what you sold it for, and which costs form part of the cost base. Good records make the difference between a clean tax return and a stressful reconstruction exercise.

CGT can also affect business decisions. Selling a business, transferring assets, restructuring ownership, or using part of your home for business can all have tax consequences. Before making a significant asset sale, it is sensible to speak with an accountant or registered tax agent.

Easy Way To Remember It

CGT is about the profit on the asset, not the full sale price. Selling an asset for $100,000 does not mean $100,000 is taxed; the tax question starts with the gain after the cost base and allowable adjustments.

How Gimbla Can Help

Gimbla helps keep the records behind a CGT calculation organised: bank transactions, bills, receipts, journals, reports and asset-related notes can all support the numbers your accountant needs later.

For everyday bookkeeping, start with bank reconciliations, the depreciation user guide, and the fixed asset depreciation guide. These workflows do not replace tax advice, but they make it easier to keep the supporting records in one place.

Helpful Gimbla Guides

In Short

Capital Gains Tax (CGT) is tax on the profit from disposing of certain assets. For small businesses, the practical job is to keep clear records, plan for the cash impact, and get advice before major asset sales or ownership changes.