Most capital gains tax calculators online give you one number and hide the working. They take a gain, halve it, multiply by a rate, and stop. That was a reasonable shortcut while the rules were stable. From 1 July 2027 they will not be: the 12 May 2026 federal Budget announced that the 50% CGT discount for individuals is being replaced by inflation indexation plus a 30% minimum tax on the real gain. If you sell a parcel of shares or an investment property around that date, the old shortcut gives you the wrong answer.
This post is the plain-English reference for how capital gains tax is actually worked out in Australia: the cost base, the 12-month discount rule, how the gain stacks onto your other income, and the marginal rate that lands on top. Then it walks through what changes from 1 July 2027, and points you at the live CGT Discount Changes Calculator so you can put your own numbers through both regimes side by side.
The short version
Capital gains tax in Australia is not a separate tax with its own rate. Your net capital gain is added to your taxable income for the year and taxed at your marginal rate. Holding an asset for more than 12 months currently halves the assessable gain (the 50% discount). From 1 July 2027 that discount is being replaced by inflation indexation plus a 30% floor on the real gain. The calculator shows both regimes for your inputs so you can see which one bites and by how much.
How capital gains tax is calculated in Australia
There is no separate capital gains tax in Australia. CGT is part of income tax. When you sell (or otherwise dispose of) an asset for more than it cost you, the gain is added to your assessable income for that financial year and taxed at your marginal rate. That single fact explains almost everything else about how the maths behaves: a gain realised in a high-income year is taxed harder than the same gain realised in a low-income year, because it stacks on top of whatever else you earned. The ATO sets this out in its capital gains tax guidance.
The calculation runs in four steps.
- Work out the cost base. This is what you paid for the asset plus the incidental costs of buying and selling it (brokerage, conveyancing, stamp duty, and certain holding costs that were not already deducted). For shares it is usually purchase price plus brokerage; for property it is purchase price plus stamp duty, legal fees, and capital improvements.
- Subtract the cost base from the sale proceeds. Proceeds minus cost base is your nominal gain (or capital loss, if negative). Capital losses offset capital gains in the same year, and unused losses carry forward indefinitely.
- Apply the discount if you held for more than 12 months. An individual who has held the asset for at least 12 months currently discounts the gain by 50%. Only the discounted half is assessable. Hold for less than 12 months and the full nominal gain is assessable.
- Add the assessable gain to your other income and apply your marginal rate. The discounted gain is not taxed in isolation. It sits on top of your salary, rental income, dividends, and anything else, and is taxed at whatever bracket that pushes you into, after the Low Income Tax Offset and the Medicare Levy are accounted for.
The 12-month rule, precisely
The discount requires you to have owned the asset for at least 12 months before the CGT event. The clock runs on the contract date, not the settlement date, for both purchase and sale (the ATO treats the disposal as occurring on the date you enter the contract, CGT event A1). Selling one day short of 12 months forfeits the entire discount and the full nominal gain becomes assessable, which is the single most expensive avoidable mistake in the whole calculation.
Why “gain times marginal rate” is not the real number
A gain rarely sits cleanly inside one bracket. A large gain can push you from the 30% bracket up into the 37% or 45% bracket, so part of it is taxed at one rate and part at another. It also interacts with the Low Income Tax Offset (which phases out as income rises) and the Medicare Levy (which phases in). The honest way to compute the tax attributable to a gain is to calculate your total tax with the gain, calculate it again without the gain, and take the difference. That captures bracket crossings, LITO phase-out, and Medicare phase-in correctly. The calculator does exactly this decomposition rather than a flat gain-times-rate shortcut.
A worked example under the current rules
Sam is 44, on a $120,000 salary, and sells a long-held share parcel. Bought for $40,000 (including brokerage), sold for $100,000, held for eight years. Under the current rules:
| Step | Value |
|---|---|
| Nominal gain (proceeds minus cost base) | $60,000 |
| Held over 12 months, so 50% discount | Assessable gain $30,000 |
| Added to $120,000 salary | Taxable income $150,000 |
| Tax on the gain (with-minus-without) | ~$11,100 (37% bracket plus Medicare) |
The $30,000 assessable gain stacks on Sam's salary and falls almost entirely in the 37% bracket, with the 2% Medicare Levy on top. That is why timing matters so much under the current system: had Sam realised the same gain in a year with no salary (an early-retirement bridge year, say), most of the discounted gain would have sat under the tax-free threshold and the bill would have been close to zero. The discount plus the marginal-rate stacking is what made gain-timing such a powerful lever. That is precisely the lever the 2027 reform is designed to blunt.
What changes from 1 July 2027
The 12 May 2026 Budget replaced the 50% discount for individuals with two changes that work together, effective 1 July 2027:
- Inflation indexation instead of the flat 50% discount. Rather than halving the nominal gain, the new method grows your cost base by inflation over the holding period and taxes only the real gain (the growth above inflation). For a long hold in a high-inflation period the indexed cost base can be larger than half the gain would have been, so this part is not automatically worse.
- A 30% minimum tax on the real gain. Whatever your marginal-rate tax on the real gain works out to, the tax is lifted to at least 30% of that real gain. If your marginal rate already exceeds 30%, the floor never bites and you simply pay marginal rate. If your marginal rate would have been below 30% (a low-income or bridge year), the floor raises it to 30%.
The new regime computes both numbers and charges the higher of the two: marginal-rate tax on the real gain, or 30% of the real gain. Treasury sets out the mechanic in its Negative Gearing and Capital Gains Tax Reform factsheet.
The income-support exemption
The Treasury factsheet exempts recipients of means-tested income support payments from the 30% floor: if you receive any qualifying payment (Age Pension, JobSeeker, Disability Support Pension, Parenting Payment, Carer Payment, Youth Allowance, and similar) in the financial year of the sale, the floor is bypassed and only marginal-rate tax on the real gain applies. The exemption only changes the outcome when the floor would otherwise have been the binding constraint.
Who the change actually affects
The two regimes can produce very different bills depending on your income in the sale year. The pattern is worth internalising before you run your own numbers.
| Situation | What binds under the new rules |
|---|---|
| Low or zero income in the sale year (bridge year, gap year) | The 30% floor, often a large increase versus the old near-zero bill |
| Moderate other income (a partly-worked or early-retirement year) | Usually marginal rate, narrowly above the floor; small difference |
| High income (peak earnings) | Marginal rate, the floor is irrelevant; difference is small |
| Receiving a means-tested income support payment | Exemption applies, floor bypassed; new regime roughly neutral |
The headline takeaway is counterintuitive: the reform hits low-income sale years hardest, not high-income ones. A high earner already pays well above 30% at the margin, so the floor never engages. It is the early retiree timing a gain into a zero-income bridge year who sees the bill move the most, which is the timing behaviour the floor was designed to stop. For five fully worked scenarios with the dollar figures spelled out, see How the 2027 CGT Changes Will Affect Your Next Sale.
Try it yourself
Work out your own capital gains tax
Enter your cost base, sale price, holding period, other income in the sale year, and a CPI assumption. The calculator shows the old 50% discount bill and the new inflation-indexed plus 30% floor bill side by side, with the dollar differential and which constraint binds. No signup required.
Open the CGT calculatorUsing the calculator
Five inputs drive the result, and each maps to one of the steps above:
- Cost base. Original purchase price plus the incidental costs of acquisition (brokerage, stamp duty, legal fees).
- Sale price. The disposal proceeds.
- Years held. Drives both the 12-month discount eligibility under the old rules and the inflation indexation under the new rules.
- Other taxable income in the sale year. What the gain stacks on top of. This is the single biggest driver of which regime costs more.
- CPI assumption. The inflation rate used to grow the cost base under the new regime.
There is also an income-support toggle that applies the exemption and bypasses the floor. Both regimes are computed at the same FY27-28 tax brackets so the comparison is regime-on-regime, not muddled with bracket changes. The result card shows old-rules tax, new-rules tax, the dollar differential, and a badge telling you whether the floor binds, marginal rate applies, or the exemption was used.
What the calculator does not model
It is a single-asset, single-year tool. Jointly-owned assets need each owner's share run separately. It does not model a property held across the 1 July 2027 boundary, where Treasury's transitional rules split the gain at the asset's 1 July 2027 value (pre-2027 slice keeps the 50% discount, post-2027 slice gets indexation plus the floor). For that split on investment property, see Should You Sell Your Investment Property Before 1 July 2027? The full ProjectFi planner re-runs your whole projection with per-property apportionment when the Budget 2026 toggle is on; the mechanic is documented on the methodology page.
The bottom line
Capital gains tax in Australia is your marginal income tax applied to a gain, currently halved if you held for over 12 months. From 1 July 2027 the halving is replaced by inflation indexation plus a 30% floor on the real gain, which mainly affects gains realised in low-income years. The calculator shows both regimes for your exact inputs so you are working from your own numbers, not a rule of thumb.
Sources
- ATO, Capital gains tax. How CGT is calculated, the cost base, the 50% discount, and the 12-month rule under the current law.
- ATO, CGT discount. The 12-month holding requirement and the 50% discount for individuals.
- Treasury, Negative Gearing and Capital Gains Tax Reform factsheet (PDF). Primary source for the 1 July 2027 regime change, the 30% floor, the inflation indexation, and the income-support exemption.
- ProjectFi, How the 2027 CGT Changes Will Affect Your Next Sale. Five worked scenarios with the dollar figures spelled out.
- ProjectFi, How the 2026 Federal Budget Changes the FIRE Math. The broader Budget picture this CGT change sits inside.