Q&A · Last reviewed 2026-05-01
What is the difference between CGT and income tax in Australia?
Income tax applies annually to wages, business profit, rent, and interest at marginal rates. Capital gains tax (CGT) applies once at sale of an asset to the gain, but with a 50% discount on assets held over 12 months, taxed at half the marginal rate.
Both fall under the Income Tax Assessment Act 1997. CGT is technically an integration into income tax, not a separate tax. But the mechanics differ. Income tax taxes you each year on net assessable income (wages + interest + rent + business profit). CGT taxes the gain on a sale, treating the gain as additional income in the year of sale.
The 50% discount (s115-25) is the structural difference for property: a $300K capital gain after 12+ months held is added to taxable income as $150K (post-discount), then taxed at marginal rate. A $150K rental income line item would also be taxed at marginal rate annually with no discount. Same dollar amount, very different tax treatment.
Strategic implication: holding for 13+ months always beats <12 months by exactly half the tax bill. Selling in a low-income year (between jobs, semi-retired, business loss year) shifts the gain into a lower marginal bracket. Spreading by selling pieces over multiple years reduces total tax via lower average bracket.
Primary sources
Related
Informational. Not financial advice. Verify with a licensed adviser appropriate to your circumstances.
Open the playbook — 11 chapters end-to-end, every threshold cited.