Short term vs long term capital gains in Australia
The 50% CGT discount is the single biggest tax break available to Australian share investors, and it kicks in after just 12 months. Hold shares for more than 12 months before selling, and only half the gain is assessable. Sell earlier, and you pay tax on the full amount.
The 12-month rule
The ATO draws the line at 12 months, measured from the contract date of purchase to the contract date of sale. Settlement dates do not matter.
One detail catches people out: you need more than 12 months. Buy on 1 March 2025, and you must sell on 2 March 2026 or later to qualify. Selling on exactly 1 March 2026 does not count.
What the discount actually saves you
Emma buys 1,000 Fortescue (FMG) shares at $18.00 in September 2025 and sells at $24.00.
- Cost base (including brokerage): $18,019.90
- Net proceeds: $23,980.10
- Capital gain: $5,960.20
If she sells in February 2026 (5 months held): The full $5,960.20 is assessable. At a 32% effective rate (30% plus Medicare levy), she pays roughly $1,907.
If she had bought in September 2024 instead (17 months held): The 50% discount applies. Only $2,980.10 is assessable. Tax: roughly $954.
That is a $953 saving on the same profit, just for waiting past the 12-month mark.
Side-by-side at different income levels
Tax on a $10,000 capital gain across the 2025-26 brackets (rates include the 2% Medicare levy):
| Marginal rate | Short-term tax | Long-term tax | You save |
|---|---|---|---|
| 18% ($18,201-$45,000) | $1,800 | $900 | $900 |
| 32% ($45,001-$135,000) | $3,200 | $1,600 | $1,600 |
| 39% ($135,001-$190,000) | $3,900 | $1,950 | $1,950 |
| 47% ($190,001+) | $4,700 | $2,350 | $2,350 |
The higher your income, the more the discount saves you in absolute dollars.
SMSFs get a smaller discount
Self-managed super funds receive a 33.33% discount instead of 50%. A $12,000 gain held over 12 months leaves $8,000 assessable, taxed at the 15% super rate: $1,200 in tax. An individual in the 32% bracket would pay $1,920 on the same gain.
Companies get no discount at all
Companies are not eligible for any CGT discount. The full gain is taxed at 25% or 30% depending on size. This is a real reason many investors hold long-term shares in their personal name rather than through a company structure.
Practical takeaways
Do not sell just before the 12-month mark if you can avoid it. If you are a few weeks away from qualifying, the tax saving is almost always worth the wait.
But do not hold a loser just for the discount. If a share has dropped and you want out, waiting for a discount on a gain you do not have makes no sense.
Check your lots before EOFY. As 30 June approaches, review your portfolio for holdings nearing the 12-month threshold. A few extra days can mean a meaningfully lower tax bill.
Losses apply before the discount. A $5,000 loss offsets $5,000 of a long-term gain at its full pre-discount value, not just $2,500.
Tracking your holding periods
When you have bought the same stock multiple times, each parcel has its own acquisition date. Sell 300 CBA shares and you need to know which parcels make up that sale.
TrackMyShares tracks each purchase as a separate tax lot, so you can see at a glance which parcels qualify for the discount. The tax reports automatically classify gains as short-term or long-term. You can also view your portfolio on any past date.
For a detailed walkthrough of CGT calculations, see how to calculate capital gains on shares in Australia. Use the CGT calculator to estimate the tax impact of a potential sale. To understand how gains interact with your overall tax position, read how much tax do you pay on shares in Australia.
Sign up for free and let TrackMyShares track your holding periods and CGT discount eligibility automatically.
This is general information, not personal tax or financial advice.