Mei is sitting with a property sale decision. Her Brisbane townhouse has increased in value, but the amount she'll report for tax depends on more than the sale price. In broad terms, an Australian resident individual who has held an eligible asset for at least 12 months may generally reduce the capital gain by 50%, although the final tax outcome depends on ownership structure, capital losses, residency and other circumstances.
Who this article is for: Australian investors, property owners, business owners, trustees, SMSF members and professionals considering a sale or reviewing how an asset is held.
Currency note: This article reflects Australian rules, thresholds and regulator guidance current as at 09/2026.
Table of Contents
- What the CGT Discount Actually Is
- The 50% and 33% Rules Side by Side
- How Ownership Structure Changes the Outcome
- A Parramatta Property Trust Worked Example
- The 2027 Indexation Shift Worth Planning Around
- Affordable Housing and Build-to-Rent Overlays
- Common Misconceptions and Where to From Here
What the CGT Discount Actually Is
Mei bought a Brisbane townhouse in 2019 for $620,000 and sold it in 2024 for $810,000. Before considering selling costs, ownership expenses and other adjustments, the difference is a $190,000 capital gain. Because she held the asset for at least 12 months and is an Australian resident individual, the general CGT discount may reduce the gain to $95,000 before it is included in her tax calculation. The Australian Taxation Office (ATO) explains that eligible Australian resident individuals generally pay tax on only half of the net capital gain after applying the discount in its CGT discount guidance.
The discount is best understood as a reduction to the eligible capital gain, not as a 50% reduction in the tax bill. You first work out the capital proceeds and cost base, then account for relevant adjustments and capital losses. The remaining gain is the amount to which the discount method may apply.
The 12-month rule creates a clear dividing line. It works a little like long-service leave: the benefit generally becomes available only after you've completed the qualifying period. If an asset was held for less than 12 months, the general discount isn't available. For property, the holding-period calculation can involve improvements and construction timing, so the contract dates and records deserve careful attention, as the ATO notes in its capital gain calculation guidance.
Capital assets can include shares, investment property, certain collectibles and cryptocurrency transactions, including a conversion from crypto to Australian dollars. The tax treatment depends on the nature of the asset and the transaction, so a simple sale-price-minus-purchase-price calculation may not be enough. Readers dealing with land should also distinguish ordinary income treatment from capital treatment, and may find this background on capital gains on land sales useful alongside professional advice.
The standard rule has a long history. Australia introduced CGT in 1985–86, and replaced the inflation indexation approach with the current discount system in 1999–2000. Assets acquired before 20 September 1985 remain CGT-free, while transitional rules applied to assets bought between 20 September 1985 and 20 September 1999, as outlined in the Parliamentary Budget Office briefing.
For a broader explanation of situations where CGT may not apply, see Everglow's guide to capital gains tax exemptions in Australia. Trusts and complying superannuation entities use different discount rates, and proposed future reforms may change the calculation for later gains.
The 50% and 33% Rules Side by Side
The headline comparison is straightforward, but the tax result isn't. Australian resident individuals and trusts can generally access a 50% discount on an eligible gain after the 12-month holding requirement. Complying superannuation entities generally receive a 33⅓% discount, leaving two-thirds of the relevant gain taxable. Companies generally can't use the CGT discount, so the full capital gain is included in the company's calculation.
The ATO's discount method guidance confirms the different treatment for individuals, trusts and complying superannuation entities. The discount is applied after capital losses are offset, which means the order of the calculation matters.
Using Mei's unadjusted $190,000 gain as a simple illustration, an individual pathway could leave $95,000 to be included in her taxable income. A complying SMSF pathway could leave approximately $126,667 taxable after the one-third discount. If that amount were taxed at the 15% rate applying to relevant accumulation-phase earnings, the tax calculation would be approximately $19,000, subject to the fund's circumstances and the rules applying to the gain. These figures illustrate the mechanics only, not a personal tax result.
The discount reduces the gain, not the tax rate that applies to an individual's remaining income. A person with other taxable income may have the discounted gain taxed at a higher marginal rate than someone who sells in a lower-income year.
| Entity type | Discount rate | Taxable gain after discount | Tax treatment notes |
|---|---|---|---|
| Australian resident individual | 50% | Half of the eligible net gain | Generally included in personal taxable income and taxed at marginal rates |
| Trust | 50% | Half of the eligible net gain | Trust distribution and beneficiary rules affect the final result |
| Complying superannuation entity | 33⅓% | Two-thirds of the eligible net gain | Tax treatment depends on the fund’s phase and circumstances |
| Company | Generally unavailable | Full eligible gain | The company generally includes the full gain in its assessable income |
Important distinction: A discount percentage isn't the same thing as a tax percentage. First reduce the gain, then apply the relevant tax rules to the amount that remains.
How Ownership Structure Changes the Outcome
The same asset can produce different outcomes depending on who owns it. That choice affects more than CGT. It can change control, asset protection, estate planning, distribution flexibility, borrowing arrangements and the timing of cash available to the owners.
Direct individual ownership is usually the clearest structure for reporting. An eligible Australian resident individual may generally access the 50% discount, provided the asset satisfies the holding-period and other requirements. A sole trader doesn't receive a separate company-style CGT treatment merely because the person carries on business as a sole trader.
A discretionary trust can generally access the discount, but the trust's capital gain and the eventual beneficiary distribution need to be handled carefully. The beneficiary's circumstances can affect the practical tax outcome. Distributions to minors may also attract special rules, so trustees shouldn't assume that distributing a discounted gain produces the same result as an adult beneficiary receiving it.
Companies generally don't receive the discount. The full gain is ordinarily included in the company's tax calculation, and later extraction of funds can raise separate questions about dividends, retained profits and shareholder tax.
SMSFs can receive the 33⅓% discount where the relevant conditions are met. The fund's phase, investment strategy, pension status, contribution history and compliance obligations all matter. A structure that appears tax-efficient in isolation may not suit an investor's broader retirement or estate-planning objectives.
| Structure | Discount access | Key caveat | Planning consideration |
|---|---|---|---|
| Individual | Generally 50% | Holding period and residency conditions apply | Simple reporting, but the gain may meet personal marginal rates |
| Discretionary trust | Generally 50% | Distribution and beneficiary rules require care | May offer flexibility, but control and governance must be maintained |
| Company | Generally unavailable | Full gain is generally taxable | Review retained earnings, extraction and long-term ownership goals |
| SMSF | Generally 33⅓% | Superannuation rules and fund phase affect the result | Must align with retirement strategy and investment restrictions |
The distinction between a unit trust and a family trust can be important where several investors contribute capital or expect defined economic interests. Everglow's explanation of unit trusts and family trusts provides useful structural context, but the right vehicle should be chosen before acquisition rather than after a sale becomes likely.
A Parramatta Property Trust Worked Example
The Nguyen family owns a townhouse in Parramatta and is considering a sale after a long holding period. Assume the property cost $620,000, with $45,000 of stamp duty, legal fees and a bathroom renovation treated as cost-base elements. They sell for $980,000, with agent fees and marketing reducing the capital proceeds used in the calculation.
On these simplified assumptions, the adjusted cost base is $665,000. If sale costs total $10,000, the adjusted proceeds are $970,000, producing a gross capital gain of $305,000. If the property is held in a structure eligible for the general individual and trust discount, the discounted gain would be $152,500, before considering capital losses, other adjustments and the recipient's tax position.
The arithmetic is only the middle of the analysis. The ownership vehicle determines where the gain is reported and which discount rules may apply.
| Line item | Direct parents | Family trust, adult beneficiary | SMSF |
|---|---|---|---|
| Sale proceeds after assumed sale costs | $970,000 | $970,000 | $970,000 |
| Adjusted cost base | $665,000 | $665,000 | $665,000 |
| Gross capital gain | $305,000 | $305,000 | $305,000 |
| Discount treatment | Generally 50% | Generally 50% | Generally 33⅓% |
| Illustrative taxable gain | $152,500 | $152,500, subject to trust distribution rules | Approximately $203,333, subject to fund rules |
If the parents owned the townhouse directly, the discounted amount would generally be attributed to them and taxed with their other income. If a family discretionary trust owned it, the trust could generally apply the discount before distributing the relevant capital gain, but the adult beneficiary's circumstances and the trust deed would matter. If the SMSF owned the asset and satisfied the relevant conditions, the one-third discount would leave a larger taxable portion inside the fund.
This is why a property sale review should include the purchase documents, improvement invoices, sale costs, trust deed, distribution records and fund records. The calculation isn't changed by the label on the structure. The reporting pathway and tax consequences are.
For a focused discussion of trust treatment, see Everglow's article on capital gains tax in a trust.
The 2027 Indexation Shift Worth Planning Around
A property bought in 2002 and sold in 2029 could leave an investor comparing two different periods of growth. Earlier value increases might remain under existing treatment, while later increases could be assessed under a proposed indexation framework. The calculation may therefore resemble a timeline with separate lanes, rather than one discount applied to the entire gain.
Newer federal materials describe a proposal that, if legislated, would from 1 July 2027 replace the discount for many assets with cost-base indexation and a 30% minimum tax on gains accruing from 1 July 2027. Transitional rules would separate earlier and later growth. The commencement date, coverage and final operation remain subject to legislation and should be checked against current Treasury material before a sale decision.
Under indexation, the cost base is adjusted to recognise inflation during the ownership period. That does not guarantee a better outcome than the current percentage discount. The result would depend on the purchase date, sale date, real growth, ownership structure, losses and the taxpayer's other income.
For a long-held asset, the owner may need acquisition records, valuation evidence and a defensible method for identifying when economic growth accrued. A property sold after a possible commencement date could require the gain to be divided between pre-change and post-change periods, rather than assessed under one method.
The proposed 1 July 2027 commencement date, which remains subject to legislation, should not be treated as an automatic instruction to sell before 30 June 2027. An early sale could affect borrowing, market exposure, cash flow and commercial plans. Individuals, trusts, partnerships, companies and superannuation entities may also receive different treatment.
Historical rules for pre-1999 assets form a separate period. Earlier reform replaced CPI indexation with the discount method, while the proposed framework would introduce a different transitional approach. These periods should not be combined into a single rule.
Planning question: Before relying on a proposed reform date, establish what is legislated, how any transitional rules apply, and whether the ownership structure and expected sale date create a genuine economic benefit.
Affordable Housing and Build-to-Rent Overlays
Some housing arrangements sit above the standard discount. Eligible affordable housing can add a further concession of up to 10%, potentially lifting the maximum capital gains discount to 60%, subject to strict conditions. The ATO says the affordable-housing concession requires the property to be held for at least three years and managed by a registered community housing provider. See the ATO guidance on the CGT discount for affordable housing.
The registered provider's role is central. An owner should retain agreements, eligibility records, management evidence and disposal documentation showing that the arrangement met the relevant conditions. If the property is later used or sold in a way that breaks the qualifying arrangement, the additional concession may not be available or may require review.
This isn't a routine investor upgrade to the ordinary 50% rule. It's a specialised concession linked to the way the housing is provided, who manages it and how long the arrangement continues. Resources discussing affordable housing investments can help frame the sector, but they shouldn't replace checking current ATO requirements.
Build-to-rent developments can involve a separate policy layer. From the 2026 myTax instructions, the ATO identifies an eligible build-to-rent development as potentially receiving a maximum capital gains discount of 60% on sale, reflecting a special rule beyond the ordinary framework. Eligibility depends on the development and statutory requirements, so a typical individual landlord shouldn't assume the uplift applies.
These concessions are most relevant to larger-scale owners, not-for-profits, property developers, managed investment structures and fund managers. A transaction review should examine the ownership entity, construction and operating records, provider arrangements, holding period and the precise disposal conditions before modelling the result.
For property-specific tax context, Everglow's guide to capital gains tax on property in Australia can be read alongside current official guidance.
Common Misconceptions and Where to From Here
Misconception one: the discount applies automatically. It doesn't. The asset generally needs to have been held for at least 12 months, and other conditions can affect eligibility. The acquisition date and CGT event date should be checked from contracts, not estimated from settlement or memory.
Misconception two: companies receive the same 50% reduction. Companies generally can't access the CGT discount. Changing ownership after an asset has gained value can itself create tax and transaction consequences, so structure should be reviewed before acquisition or well before a sale.
Misconception three: every renovation increases the cost base dollar for dollar. Capital improvements may form part of the cost base, but repairs, deductions, depreciation interactions and private expenses can be treated differently. Keep invoices and distinguish the nature of each cost rather than adding every property payment to one running total.
Misconception four: the 2027 reform is settled exactly as described in every announcement. Future tax measures need to be checked against enacted legislation, explanatory material and current ATO guidance. The proposed 1 July 2027 shift creates a planning issue, but it isn't a reason to ignore commercial reality or make a rushed sale.
A sound review usually brings four questions together:
- Timing: Does the proposed sale date satisfy the holding-period requirement, and could another financial year change the surrounding income context?
- Structure: Is the asset held by an individual, trust, company or superannuation entity, and does that structure still fit the owner's objectives?
- Records: Can the owner substantiate the purchase price, eligible costs, improvements, sale expenses and ownership dates?
- Coordination: Do the sale, superannuation strategy, debt position and estate plan work together?
Everglow Prosperity provides tax and accounting, financial planning, lending and advisory support, including reviews of property, trust and retirement structures. Its CGT planning and reduction guide offers further context, but personal advice is needed before acting.
The core answer is simple: an eligible Australian resident individual or trust may generally reduce a qualifying gain by 50% after the 12-month holding requirement, while a complying superannuation entity generally uses a 33⅓% discount and a company generally does not receive the discount. The right approach depends on the asset, ownership, records, timing, residency and the rules in force when the CGT event occurs.
If you would like clarity on how these principles may apply to your own circumstances, contact Everglow on 1300 913 929 or email contact@everglow.au.
To book directly: Book a meeting with Panbo.
Tags: CGT discount Australia, capital gains tax, Australian property tax, SMSF tax, family trusts, investment property, tax planning, affordable housing
