What is the CGT discount in Australia?

If you are an Australian resident individual or trust and you’ve owned an asset for more than 12 months, you may be eligible to reduce the capital gain by 50 % (individuals and trusts) or 33 ⅓ % (complying superannuation entities) before applying tax.

What key requirements must be met to use the CGT discount?}

You must have held the CGT asset for at least 12 months (not including the date of acquisition and disposal).

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Understanding the Capital Gains Tax (CGT) Discount in Australia I Trinity Accounting Practice

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Introduction

The Capital Gains Tax (CGT) discount allows eligible individuals, trusts, and superannuation funds to reduce the taxable capital gain from the sale of an asset. Understanding how the CGT discount works can help investors and property owners minimize their tax obligations while ensuring compliance with Australian tax laws.

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Who Is Eligible for the CGT Discount?

The CGT discount applies to:

✔ Individuals (including sole traders)✔ Trusts✔ Complying superannuation funds

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Companies are not eligible for the CGT discount.

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How the CGT Discount Works

To qualify for the 50% CGT discount (for individuals and trusts) or the 33.33% discount (for super funds), you must:

Own the asset for at least 12 months before selling it.
Be an Australian resident for tax purposes.
Ensure the asset is subject to CGT rules (some assets, such as personal use items, may be exempt).

If these conditions are met, only half of the capital gain is added to your taxable income.

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Example Calculation of CGT Discount

🔹 You buy a property for $500,000 and sell it three years later for $700,000.
🔹 The capital gain is $200,000.
🔹 As an individual, you qualify for the 50% CGT discount, reducing the taxable gain to $100,000.
🔹 This $100,000 is added to your income and taxed at your marginal tax rate.

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Exemptions and Special Rules

🚫 The CGT discount does not apply to:

Assets held for less than 12 months.
Company-owned assets.
Foreign residents (limited access to the discount since 8 May 2012).

Certain assets, such as your primary residence, may also be fully exempt from CGT.

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How to Minimize CGT Legally

✅ Hold assets for over 12 months to qualify for the discount.
✅ Offset gains with capital losses from other investments.
✅ Consider tax planning strategies with a professional accountant.

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Conclusion

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The Capital Gains Tax (CGT) discount is a valuable tax concession for individuals, trusts, and superannuation funds. By holding assets for over 12 months, investors can legally reduce their tax liability and maximize after-tax profits.

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For expert advice on capital gains tax, tax planning, and investment strategies, contact Trinity Accounting Practice today.

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☎️ 02 9543 6804
📍 159 Stoney Creek Road Beverly Hills NSW 2209
🌐 www.trinitygroup.com.au

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