Most business owners heard “CGT changed” and filed it away. But the numbers tell a very different story.
The 2026-27 federal budget introduced a Capital Gains Tax reform Australia-wide, and the Australian Taxation Office has since updated its guidance to reflect the new rules. At Australian Business Magazine, we’ve put it all together in one place for you.
The problem is, most people are treating the changes as a minor admin update. Don’t worry. We’ll walk you through real CGT examples, so by the end, you’ll know exactly where you land. First, we’ll talk about how capital gains tax is calculated. Then, we’ll reveal who pays more and who pays less.
Read on to find out more.
What Is CGT and Why Do the New Rules Change Things?
CGT, or capital gains tax, is the tax you pay on the profit from selling an asset. The rule changes affect how much of that profit gets taxed.
To be very specific, CGT isn’t a separate tax on its own. It gets added to your income tax for that financial year, and you pay tax on the total combined amount. So if you sell an asset and make a gain, that gain sits on top of everything else you’ve already earned.
CGT events are the specific moments that create a capital gains tax obligation. Selling a property or disposing of shares are two of the most common ones. That means when the rules change, they don’t hit every type of CGT event the same way.
Capital Gain or Loss: How the ATO Works It Out
The ATO works out your capital gain or loss by comparing what you paid for an asset against what you received when you sold it. It’s a pretty simple formula once you see it laid out.
The Australian Taxation Office looks at two main figures for tax purposes. First, your cost base, which is what you originally paid for the asset. Second, your capital proceeds, which are what you received from the sale. The difference between those two figures is your net capital gain or loss for that financial year.
It’s worth taking each part of this into account separately, because they each affect your final tax bill in different ways. So here’s how the ATO breaks it down.
What Counts as Capital Proceeds
Capital proceeds are everything you receive from disposing of an asset, including cash, property, and non-cash benefits.
The market value of what you receive counts too, not just the cash amount. So if someone pays you in shares instead of money, the ATO still values those shares and includes them in your capital proceeds. Incidental costs like legal fees or brokerage fees don’t reduce your proceeds; instead, they can be added to your cost base.
How a Capital Loss Affects Your Bill
A capital loss isn’t all bad news. It can offset your capital gains and lower your overall tax bill for the year.
A capital loss occurs when your capital proceeds are lower than your cost base. In that case, you can’t use it as a tax deduction against your regular income, but you can apply it against any capital gains you made in the same financial year.
Any unused capital losses don’t disappear either. They carry forward to future income years and sit in your account until you have a gain to apply them against in previous years or future years.
When a Capital Gain Hits Your Assessable Income
Ever wondered why a good financial year can suddenly mean a bigger tax bill? A net capital gain added to your assessable income is usually why.
Once the ATO works out your net capital gain for the income year, it gets added straight to your assessable income. The higher your assessable income, the higher the rate you’ll pay on that gain. And that’s exactly why the timing of your asset sale can change your tax bill quite a bit.
The 50% CGT Discount: Who Still Gets It?
The 50% CGT discount is still on the table for many Australians, but not everyone qualifies, and the new rules have narrowed the field a little.
Australian resident individuals and trusts can still access the 50% CGT discount, but only if they’ve owned the asset for over 12 months. The way it works is simple. The ATO cuts the taxable portion of your capital gain in half before it gets added to your assessable income. That alone can drop your tax bill significantly, depending on the size of your gain.
Companies don’t get the CGT discount at all. And foreign residents lost access to it under earlier rule changes, too. Super funds sit in the middle; they’re eligible for a reduced 33.3% discount instead. Australian resident individuals are also fully exempt from CGT on their family home in most cases, thanks to the main residence exemption.
CGT Examples: Investors Who Now Pay More
Under the updated rules, investors without access to the CGT discount or small business concessions are carrying a noticeably heavier tax load. Let’s walk through the groups feeling the biggest tax hit right now.
- Short-Term Asset Sellers: Investors who sell an asset held for under 12 months lose access to the CGT discount entirely. That means the full net capital gain gets added to their taxable income, and they pay tax at their marginal rate. A classic example is someone who flipped an investment property within 10 months.
- High-Income Earners With Large Gains: When a sizeable capital gain lands on top of an already high salary, it pushes total taxable income into the top bracket. There’s no separate capital gains tax rate in Australia. It all gets assessed together, and the ATO taxes the full amount accordingly.
- Property Investors Caught by Cost Base Changes: Some property investors are finding their net capital gain higher than expected. That’s because recent changes affect which costs can be included in the cost base. Fewer deductions mean a bigger taxable gain at the end of the sale.
A common thread runs through all three of these examples. The less access you have to discounts or concessions, the more capital gains tax you’ll hand over to the ATO.
Active Asset Sales and the CGT Scenarios That Shift
Selling an active asset as a small business owner can work in your favour, but only if you understand which concessions apply to your situation. In certain circumstances, the tax outcome looks very different from what a regular investor would face.
The ATO offers a set of small business CGT concessions for eligible business owners. These apply to active assets, which are assets used in carrying on a business, like equipment, premises, or goodwill. Not every business owner can claim them, though. You need to meet specific criteria around turnover, asset value, and how the asset was used.
Read on to see how three common scenarios play out.
Small Business Owner Sells an Active Asset
A qualifying small business owner can reduce their capital gain significantly, sometimes down to zero, using the small business CGT concessions.
One of the most useful tools here is the small business retirement exemption. It lets eligible owners exclude up to $500,000 of a capital gain from tax over their lifetime.
In some cases, that wipes out the remaining capital gain entirely. However, you still need to meet the active asset test and other conditions to claim it. For many small business owners, it’s one of the most valuable concessions available.
Property Investor Sells After Two Years
Two years feels like plenty of time, but the new cost base rules mean some property investors are walking away with a larger tax bill than they expected.
We’ve already mentioned that a property investor who’s owned an investment property for over 12 months is still eligible for the 50% CGT discount. That part hasn’t changed. In practice, though, recent rule changes around capital improvements and what counts toward the cost base have caught some investors out.
The new rules treat rental income offsets and inflation adjustments differently than before. As a result, the net capital gain can end up higher than expected at the point of sale.
Share Trader Realises a Large Capital Gain
How the ATO classifies your share activity, investor or trader, determines exactly how your capital gain gets taxed.
If you’re classified as an investor, you’re eligible for the 50% CGT discount on shares owned for over 12 months. Brokerage costs can also be added to your cost base, which reduces your overall gain.
On the flip side, if the ATO classifies you as a share trader running a business, your gains are treated as ordinary income. There’s no CGT discount, and the full amount gets assessed at your marginal tax rate.
Tax Examples: Who Actually Pays Less Under the New Rules?
Not everyone walks away with a bigger bill under the new CGT rules. Some Australians come out paying less. Here’s a quick breakdown of who benefits and why.
| Taxpayer Type | Why They Pay Less |
| Long-term individual investor | Owned asset 12+ months, 50% CGT discount applies |
| Small business owner | Small business concessions reduce or wipe out the remaining capital gain |
| Low-income earner | Lower marginal rate means less tax on the net capital gain |
| Australian resident, main home | Main residence exemption applies, no CGT at all |
| Investor with capital losses | Losses offset gains, reducing the taxable amount across investments |
Each of these examples shows that this CGT comparison isn’t straightforward. A long-term Australian resident who’s owned their investments for years and kept good records is in a solid spot.
A small business owner who qualifies for concessions can reduce capital gains to a point where the tax bill is far lower than expected.
And the main residence exemption remains one of the strongest protections available, covering most Australians on the family home entirely.
Capital Gains Tax CGT and Your Assessable Income: The Real Impact
The CGT reform impact on your assessable income is more direct. A capital gain doesn’t sit separately from your other income. It gets added to your assessable income, and that combined figure determines your tax rate for that income year.
Say you earn a $90,000 salary and make a $40,000 net capital gain in the same year. The ATO doesn’t tax those two figures separately. They get added together, and you’re assessed on $130,000 in total. That can push you into a higher bracket fast, especially if inflation has already eaten into your real returns.
This is why timing your asset sale across different financial years can lower your overall tax return liability. A year where your taxable income is lower is often the best window to sell. It’s just smart planning that any registered tax agent worth their fee will flag for you.
Need Guidance? The ATO Website Is a Good Place to Start
Now that you’ve seen how the numbers play out across different scenarios, the next step is knowing where to go for help specific to your situation.
The ATO website has detailed CGT guides, calculators, and worked examples covering the most common scenarios. If a recent sale has left you with questions about your tax return, it’s a solid first stop. The Australian Taxation Office also has a record-keeping tool that walks you through your capital gain calculation step by step.
That said, the ATO website can only take you so far. For anything complex, like active asset concessions or trust structures, professional tax advice from a registered tax agent is worth every cent. Their services go well beyond lodging your return. They’ll spot concessions you didn’t know you were eligible for and make sure nothing gets missed.
What to Do Before Your Next Tax Year Kicks In
Honestly, a little preparation now can save you a significant tax bill later. And you don’t need to figure it all out alone.
Do these four things before the next tax year wraps up:
- Check how long you’ve owned each asset before you sell
- Work out your cost base, including any incidental or improvement costs
- Find out if you’re eligible for the 50% CGT discount or small business concessions
- Get professional advice before making any major sales decisions
Capital gains tax isn’t something to sort out after the fact. The decisions you make before you sell are the ones that determine how much you pay. If you’d like to stay across topics like this one, get in touch with ABMAG, and we’ll keep you in the loop.
Frequently Asked Questions
Still have questions about your own CGT position? A registered tax agent is your best next step.
What happens to a net capital loss if I can’t use it this year?
A net capital loss can’t be applied against your regular income in the same financial year. It carries forward instead, and sits in your tax account until you have a capital gain to offset it against in future years. The remaining amount doesn’t expire. You can keep carrying it forward until it’s fully used up.
Are business assets treated differently under CGT?
Yes, in certain circumstances, business assets are subject to different tax rates and rules compared to personal investments. CGT events involving business assets, like selling equipment or goodwill, may qualify for small business concessions that don’t apply to regular investors.
The difference in tax outcomes can be considerable, depending on your turnover and how the asset was used.
Which CGT events are most common for small business owners?
The most common CGT events for small business owners involve selling or disposing of an active asset used in the business. Selling business premises, transferring goodwill, or closing down operations are all good examples.
In some cases, the small business retirement exemption can make part or all of that gain exempt from tax.
Can I reduce CGT across my investments if I have mixed results?
Yes. If you’ve made a capital gain on some investments and a capital loss on others, you can offset them against each other. The difference between your total gains and losses gives you your net capital gain or loss for the year.
However, any exempt assets, like your main residence, don’t factor into that calculation at all.
