Capital Gains Tax on Shares: Your Complete FY2025–26 Guide | taxtallee

For Australian share investors, FY2025–26 is a financial year unlike any other. On the surface, the rules are exactly the same as they were last year, the 50% CGT discount still applies to assets held for more than 12 months, your cost base is calculated the same way it has been since 1999, and nothing about your tax return has changed.

But beneath that calm surface, a seismic shift is approaching. The Federal Government's 2026–27 Budget, handed down on 12 May 2026, announced the most significant Capital Gains Tax reform in a generation, scrapping the 50% discount entirely from 1 July 2027 and replacing it with CPI cost base indexation and a new 30% minimum tax on real capital gains. That makes FY2025–26 the last full financial year where the current rules apply in their entirety. For investors sitting on significant unrealised gains, this year's tax planning deserves more attention than usual.

This guide covers everything you need to know: how CGT works on shares for FY2025–26, how to use the tools available to you, a practical year-end checklist before 30 June, and, just as importantly, what's coming, but isn't here yet.

How CGT Works on Shares in FY2025–26

Capital Gains Tax is not a separate tax, it is a component of your income tax. When you dispose of a CGT asset (such as ASX shares, ETF units, or foreign stocks) for more than you paid, the resulting capital gain is added to your assessable income for the financial year in which the disposal occurs. You pay tax on that combined income at your marginal rate.

The fundamental formula remains unchanged:

Capital Proceeds − Cost Base = Capital Gain (or Loss)

• Capital Proceeds, the amount you receive from the sale. For shares, this is the sale price multiplied by the number of shares, minus any brokerage or transaction costs paid on the sale.
• Cost Base, what it cost you to acquire the asset. For shares, this includes the purchase price plus brokerage, and can also include certain incidental costs. It does not include ongoing costs like account fees.

If your proceeds are less than your cost base, you have a capital loss. Capital losses cannot be offset against ordinary income such as salary, but they are valuable in their own right. You can use them to reduce capital gains in the same year, or carry them forward indefinitely to offset gains in future years.

The ATO emphasises in its guide on Keeping records of shares and units: "Shares or units bought at different times may have different costs. This will affect your capital gain or loss." Each separate purchase of the same company's shares creates a distinct CGT parcel with its own cost base and acquisition date, and this distinction becomes important when you sell.

The 50% CGT Discount, and Why It Matters More Than Ever

The single most valuable concession available to individual Australian investors is the 50% CGT discount. If you are an individual (not a company) and you hold a CGT asset for more than 12 months before disposing of it, only half of your net capital gain is added to your assessable income for that year.

This rule has been in place since 1999 and, for the first time, is now proposed for removal from 1 July 2027. For the FY2025–26 year, the year ending 30 June 2026, the 50% discount applies in full, exactly as it always has. That makes the 12-month holding threshold the single most important date in your tax calendar this year. If you are sitting on a profitable position and your 12-month anniversary falls in early July, waiting a few additional weeks before selling could save you a meaningful amount of tax.

The 50% discount is applied to your net capital gain — that is, after any capital losses from the same year or prior years have already been deducted. This sequencing matters: you must use your losses first, and then the discount is applied to what remains.

Capital Losses: Your Other Tax Tool

A capital loss arises when you sell a CGT asset for less than its cost base. While capital losses cannot reduce your ordinary income (such as salary or wages), they are a genuine and valuable tax planning tool:

• Same-year offset: Losses realised in FY2025–26 reduce your net capital gains for the same year, before the 50% discount is applied.
• Prior-year carried-forward losses: If you have accumulated capital losses from previous years that haven't yet been applied, they can be used against your FY2025–26 gains. You must apply them in full before applying the 50% discount.
• Carry-forward to future years: If your losses exceed your gains in FY2025–26, the remaining losses carry forward indefinitely and can be used against capital gains in future years.

Strategically realising losses before 30 June to offset same-year gains, sometimes called tax loss harvesting, is a common end-of-year approach. However, be aware that the ATO's anti-avoidance rules can apply to transactions entered into with the dominant purpose of creating an artificial or contrived loss. Genuine investment decisions that happen to generate a loss are fine; purely manufactured transactions to produce a paper loss are not.

Parcel Selection and Allocation Methods

When you own multiple parcels of the same share, bought at different times and prices, and you sell only some of them, the ATO requires you to identify which parcels you are disposing of. This is not a formality. The parcels you assign to a sale can meaningfully change the size of your capital gain, whether the 50% discount applies, and the net tax you pay.

Common allocation approaches include:

• FIFO (First-In, First-Out): The oldest parcels are treated as sold first. These are most likely to qualify for the 50% discount (having been held the longest), but may also carry the largest nominal gain if the share price has risen significantly since purchase.
• LIFO (Last-In, First-Out): The most recently acquired parcels are sold first. Useful when newer parcels have a higher cost base, which reduces the nominal gain, but those parcels may not yet qualify for the 50% discount.
• Minimise CGT: Parcels are selected to produce the lowest possible net tax outcome, taking into account both the size of the gain and whether the 50% discount applies.
• Maximise Loss: Parcels are selected to generate the largest capital loss, useful when you want to offset other gains in the same financial year.
• Manual Selection: You directly choose which parcels to assign to a sale, giving you complete control. This requires accurate, up-to-date records of every parcel.

There is no single "correct" method required by the ATO, you may choose which parcels are disposed of, provided you can support that identification through your records. What matters is that your records are accurate and that you can substantiate your choices.

Special Considerations: ETFs and Foreign Stocks

ETFs and Managed Funds

ETFs are structured as trusts, which means the fund can generate capital gains internally through its own trading activities, and it passes those gains on to you, the unitholder, even if you haven't sold any of your own units. Your annual tax statement (often called an AMMA statement for an Attribution Managed Investment Trust) breaks down the components of your distribution. These include any distributed capital gains that you must report in your tax return separately to any gain you make from actually selling your ETF units.

In other words, holding an ETF can create two separate CGT events: one from the fund's internal distributions, and one when you eventually sell your own units.

Foreign Stocks

Gains on foreign shares (US stocks, for example) must be reported in Australian dollars. The ATO requires that you convert your cost base using the exchange rate at the date of purchase, and your capital proceeds using the exchange rate at the date of sale. This means currency movements independently affect your capital gain or loss , a share might rise in USD terms but the currency shift could reduce your AUD gain, or vice versa.

• Cost Base: Calculated in AUD at the exchange rate on the day you purchased the shares.
• Capital Proceeds: Calculated in AUD at the exchange rate on the day you sold.

If you paid withholding tax or capital gains tax in the foreign country, you may be eligible for a Foreign Income Tax Offset (FITO) to prevent being taxed twice on the same gain.

Your FY2025–26 Year-End CGT Checklist

With 30 June approaching, here is a practical checklist for Australian share investors to work through before the financial year closes. Given that this is the last full year of the current CGT rules, it is worth being more deliberate than usual.

Frequently Asked Questions

Does the 50% CGT discount still apply in FY2025–26?

Yes, in full. The proposed removal of the 50% CGT discount does not take effect until 1 July 2027. Your FY2025–26 tax return, covering the year ending 30 June 2026, is entirely unaffected by the budget announcement. If you are an individual taxpayer who holds an asset for more than 12 months, you are still entitled to the 50% discount on any net capital gain.

Can I choose which parcel of shares to sell to reduce my CGT?

Yes. The ATO allows you to identify which specific parcels you are disposing of, provided you have adequate records to support that identification. This flexibility is significant, choosing the right parcels can meaningfully reduce your taxable gain. Each separate purchase of the same share at a different time is a distinct parcel with its own cost base and acquisition date.

How do I apply capital losses from previous years?

Carried-forward capital losses from prior years are applied against your current-year capital gains before the 50% discount is calculated. Importantly, you cannot choose to "save" unused losses for a more advantageous future year if you have current-year gains to offset, they must be applied in full first. Any remaining excess loss then carries forward again.

What is the CGT discount for superannuation funds in FY2025–26?

Super funds and SMSFs receive a 1/3 CGT discount on assets held for more than 12 months, compared to the 50% discount available to individuals. The proposed 2027 reforms leave the superannuation CGT discount completely unchanged, the incoming changes only affect individuals, partnerships, and trusts.

Are ETF distributions the same as capital gains from selling ETF units?

No, they are two separate CGT events. When an ETF sells assets internally and distributes the resulting capital gain to unitholders, you report that distributed gain in your tax return per your annual statement. Separately, if you sell your own ETF units for a profit, that is its own CGT event with its own cost base calculation and 12-month discount eligibility.

Does the 50% CGT discount apply to companies holding shares?

No. Companies are not entitled to the 50% CGT discount and pay tax on the full nominal capital gain at the corporate tax rate (25% or 30% depending on the company's size and circumstances). The discount, and the proposed reforms to it, apply only to individuals, partnerships, and trusts.

Do I have to use FIFO for CGT in Australia?

No. FIFO (First-In, First-Out) is one approach, but it is not mandated by the ATO. You are free to choose which specific parcels you are disposing of, as long as you can identify them in your records. Other common approaches include LIFO, Minimise CGT, Maximise Loss, and manual parcel selection, each of which can produce a different tax outcome on the same sale.

This article is for informational purposes only and does not constitute personal taxation advice. Tax laws can change and individual circumstances vary. The proposed 2026–27 Budget CGT reforms referenced in this article have not yet been legislated, and details may change before they take effect. We recommend consulting a registered tax agent or accountant regarding your specific situation.