Capital gains tax on shares: what you owe and when

Yes, capital gains tax on shares usually applies the moment you dispose of shares bought on or after 20 September 1985, whether through a sale, a takeover, or a buy-back. The net capital gain gets added to your assessable income, and if you held the shares for 12 months or more before the CGT event, you can generally halve that gain using the CGT discount.

Before you do anything else:

• Pin down the exact CGT event date (usually the contract date, not settlement).
• Dig up your contract notes, broker statements, and any corporate action notices.
• Check whether the shares were acquired before 20 September 1985, because those are generally exempt.

Key Takeaways

Capital gains tax on shares is calculated by subtracting your cost base from capital proceeds, then applying eligible losses and the 50% discount before declaring the net gain.

Point	Details
Confirm the event date	Use the contract date, not settlement, to determine which financial year the gain falls into.
Check the 12-month threshold	Shares held 12+ months before disposal generally qualify for the 50% CGT discount.
Track cost base carefully	Include brokerage and incidental costs, and reduce cost base for any non-assessable payments received.
Separate DRP and bonus parcels	Each reinvestment or bonus issue creates its own parcel with a distinct cost base and acquisition date.
Apply losses before the discount	Current-year and carried-forward capital losses reduce gains before any discount is applied.

Table of Contents

• Which share events trigger capital gains tax on shares?
• How do you calculate a capital gain or loss on shares?
• The 12-month rule and the 50% CGT discount
• Ways to legitimately reduce or defer capital gains tax on shares
• Corporate actions that complicate your cost base
• Reporting capital gains and losses on your tax return
• When to get personalised advice on shares and CGT
• Sources

Which share events trigger capital gains tax on shares?

A CGT event isn’t limited to hitting “sell” in your broker app. It also fires when your shares are compulsorily acquired in a takeover, cancelled in a company liquidation, bought back by the issuer, or given away as a gift. Each one counts as a disposal, and each one needs its own capital proceeds and cost base calculation.

• Sale on-market or off-market: the standard trigger, event date is the contract date.
• Takeovers: scrip-for-scrip deals can sometimes defer the gain, but cash consideration usually crystallises it immediately.
• Buy-backs: part of the payment may be treated as a dividend, part as capital proceeds, which changes your numbers.
• Liquidation or administration: a liquidator’s declaration can let you claim a loss even without a formal sale.
• Gifts: you’re taken to have received market value, even though no cash changed hands.
• Exercise of options: can create a new CGT asset with its own cost base and acquisition date.

Shares bought before 20 September 1985 sit outside the CGT regime entirely, so tracking that purchase date matters more than almost anything else in your records. And a detail plenty of investors get wrong: the event date is the date you signed the contract to sell, not the date the trade settled a few days later. That distinction can shift a gain from one financial year into another.

How do you calculate a capital gain or loss on shares?

The ATO’s calculation method follows a fixed sequence, and skipping a step is where most DIY calculations go wrong.

1. Work out your capital proceeds. This is what you received, or the market value of what you received if it wasn’t cash, such as scrip in a takeover.
2. Work out your cost base. Add the purchase price, brokerage, and any incidental costs like transfer fees. Then subtract any non-assessable payments (capital returns) you’ve already received on those shares, since those reduce your cost base rather than counting as income.
3. Subtract cost base from proceeds. If proceeds exceed cost base, you’ve got a gain. If the reverse is true, use the reduced cost base (which excludes some costs) to work out whether you’ve got a genuine capital loss.

If you can’t tell which specific parcel of shares you sold, because you bought the same stock on five different occasions, the ATO requires you to use first-in-first-out identification. Keeping parcel-level records from day one avoids this guesswork and can protect your discount eligibility.

Here’s a compact example. Say you bought 1,000 shares in a company for $10 each ($10,000), paid $55 in brokerage, and sold them 18 months later for $15 each ($15,000), paying another $55 brokerage on exit. Your cost base is $10,110. Your capital proceeds are $14,945 after the sale brokerage. That’s a capital gain of $4,835, before any discount is applied.

The 12-month rule and the 50% CGT discount

Hold your shares for at least 12 months before the CGT event, and you can generally halve the gain you declare. Miss that window by even a day, and the full gain is assessable.

• The 12-month clock starts from the contract date of purchase and ends at the contract date of the CGT event, not settlement dates on either side.
• Using the example above, an $4,835 gain held for 18 months becomes a $2,417.50 discounted gain added to assessable income.
• The discount doesn’t apply to gains made by companies, and it gets complicated with employee share scheme shares, where the acquisition date for CGT purposes can differ from when you actually received them.
• If you’ve bought the same stock in multiple parcels at different times, some parcels might qualify for the discount while others don’t. Track them separately.

Pro Tip: Set a calendar reminder for the 12-month anniversary of any share purchase you’re considering selling. Waiting even a few extra days can halve your tax bill on that parcel.

Ways to legitimately reduce or defer capital gains tax on shares

You’ve got genuine, ATO-sanctioned levers to pull here, not loopholes.

• Apply capital losses first. Losses can only offset capital gains, never ordinary income, but you carry forward any unapplied net capital losses indefinitely into future income years.
• Time your disposals. Because CGT is assessed in the income year the event occurs, splitting sales across two financial years, or waiting until after 30 June, can spread or defer your tax liability. This is a timing decision, not a way to escape the tax altogether, and ATO guidance is clear it shouldn’t override your actual investment view.
• Understand rollover relief. Certain corporate reorganisations allow gains to be deferred rather than crystallised. Whether it applies depends heavily on the transaction’s exact structure, which is genuinely not a DIY assessment.

Pro Tip: Never let a tax outcome drive an investment decision on its own. Selling a strong holding purely to bank a loss elsewhere, or to dodge a tax bracket, often costs more in lost growth than it saves in tax.

Steer well clear of anything marketed as a CGT “avoidance scheme.” The ATO actively reviews arrangements like this, and the record-keeping standard expected of you (proof of dates, amounts, and purpose) is the best protection you have.

Corporate actions that complicate your cost base

Dividend reinvestment plans and bonus share issues are where investors most often lose track of their own numbers. Every DRP allocation is technically a separate share purchase, with its own acquisition date and its own cost base equal to the dividend amount reinvested. Ten years of quarterly DRP participation can leave you with 40 separate parcels to track.

• DRPs and bonus shares each create a new CGT asset. The ATO’s shares and units guide confirms these need individual cost base records, not a single blended average.
• Buy-backs often split into a capital component and a deemed dividend component, so you’ll need the company’s buy-back booklet to apportion correctly.
• Takeovers and demergers can trigger an immediate gain on the cash portion while allowing rollover on any scrip portion, depending on how the deal is structured.
• Worthless shares from a company placed into liquidation or administration can be claimed as a capital loss once the liquidator issues a formal declaration, even without an actual sale.

Reporting capital gains and losses on your tax return

Your individual tax return has a dedicated capital gains section, and the order of operations matters. Add up all current-year capital gains, subtract any capital losses (current year first, then carried-forward losses), then apply the 50% discount to what’s left. The final figure is your net capital gain, and it flows into your total assessable income.

1. Total your capital proceeds across all disposals for the year.
2. Deduct capital losses, both current-year and any carried forward from previous years.
3. Apply the discount to eligible gains only.
4. Declare the net capital gain at the relevant label in your return.

Keep contract notes, sale confirmations, and corporate action notices for at least five years after you dispose of the asset, since the ATO can ask for evidence well after the transaction. The three mistakes that trip people up most: using settlement date instead of contract date, forgetting to reduce the cost base for non-assessable payments (which the ATO flags as a common error), and applying the discount to a parcel that hadn’t actually reached 12 months.

When to get personalised advice on shares and CGT

Some situations sit well beyond a spreadsheet calculation. If you control a company or trust, hold shares through a large corporate restructure, own overseas holdings, or run an SMSF with share investments, the interaction between CGT rules and your broader financial position gets genuinely complex, and whether rollover relief applies depends on the exact transaction structure.

Before any review, gather your contract notes, DRP statements, and corporate action letters. Amberwealth works through these with clients regularly, particularly where CGT decisions intersect with retirement timing, superannuation strategy, or broader investment management decisions.

— Adam

Sources

• Disposing of shares | Australian Taxation Office

If your share portfolio is tangled up with retirement timing or Age Pension planning, Amberwealth’s retirement planning advice service can help you work through the tax and cash flow implications together.

Amber Wealth Pty Ltd (ABN 16 653 279 013) is a Corporate Authorised Representative (No. 1310815) of Lifespan Financial Planning Pty Ltd (ABN 23 065 921 735), holder of Australian Financial Services Licence (AFSL) No. 229892. Financial advice is provided by Adam Sobczak, ASIC Authorised Representative No. 1234769.

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This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

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