Sold Stocks? Don't Pay Full Tax. The '12-Month Rule' That Cuts Your Bill by 50% (CGT Discount)
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| Sold Stocks? Don't Pay Full Tax. |
Making a profit on an investment is great. Paying tax on that profit is painful.
In Australia, Capital Gains Tax (CGT) is not a separate tax. Your profit is simply added to your income and taxed at your marginal rate. If you sell Shares, Property, or Bitcoin for a $100,000 profit, that money is stacked on top of your salary and taxed.
However, the ATO offers a massive reward for patience. It is called the 50% CGT Discount, and it is the single most important tax rule for investors to understand in 2026.
1. The 12-Month Golden Rule
The rule is simple: If you hold an asset for more than 12 months before selling it, you only pay tax on half the profit.
- Eligibility: Individuals and Trusts (Sorry, Companies generally don't get this).
- Condition: You must own the asset for at least 1 year + 1 day to be safe.
- Applies to: Real Estate, Shares, ETFs, and Cryptocurrency.
2. The Math: A $15,000 Difference
Let's see why "day trading" often loses to "long-term holding" due to tax.
💰 Scenario: You made an $80,000 Profit
Assume your salary is $100,000. Under the current "Stage 3" tax cuts, you are in the 30% tax bracket (plus 2% Medicare = 32%).
Scenario A: Sold after 11 months (No Discount)
- Taxable Profit: $80,000 is added to your income.
- The Hit: This pushes your total income to $180,000. A large chunk of this profit crosses into the higher 37% tax bracket.
- Estimated Tax Bill: Approx. $28,750
Scenario B: Sold after 12 months + 1 day (50% Discount)
- Total Profit: $80,000
- Taxable Profit: Only $40,000 (The other $40k is tax-free!)
- The Win: Your total income stays mostly in the lower bracket.
- Estimated Tax Bill: Approx. $13,150
Result: You saved over $15,600 in tax just by waiting one extra month.
3. The "Contract Date" Trap (Crucial Warning)
Many people get caught out by this technicality. When does the 12-month clock stop?
- It is NOT the Settlement Date: It is not the day the money hits your bank or the day the property title transfers.
- It IS the Contract Date: The clock stops the moment you sign the contract to sell (or execute the trade order for shares/crypto).
Example: You bought a house on January 1st. You sign a contract to sell it on December 20th, even though settlement is in February (13 months later).
Verdict: You FAIL the test. The contract date (Dec 20) was less than 12 months from purchase. You pay full tax.
4. Who Misses Out?
Be aware that this discount is not for everyone:
- Companies: If you buy property through a standard "Pty Ltd" company, you generally pay a flat 30% (or 25%) tax on the full profit. No 50% discount.
- Foreign Residents: Since 2012, foreign residents for tax purposes generally cannot claim the discount on property sales.
- Crypto Swappers: Be careful—swapping Bitcoin for Ethereum is considered a "Sale" by the ATO. If you do this within 12 months, you pay full tax.
The Calendar is Your Best Asset
In the Australian tax system, time is money. Before you click "Sell" on your stock app or list your property, check the calendar.
If you are at the 11-month mark, holding on for just a few more weeks could effectively double your after-tax return. Patience doesn't just pay; it saves.
Disclaimer: This article is for educational purposes only and does not constitute financial or tax advice. Tax rates (based on 2025-2026 residents) and thresholds are subject to change. Individual circumstances vary. Please consult with a qualified Accountant or Tax Professional before making investment decisions.
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