Capital gains tax on shares in 2025-26: losses, then the discount

Selling shares or ETF units in 2025-26 is a capital gains tax (CGT) event, and the tax comes from a short sequence rather than a rate. Subtract your capital losses from your gains, halve what is left on shares you owned for at least 12 months if you are an Australian resident for tax purposes, and the result is your net capital gain. The ATO says you pay tax on it at your marginal income tax rate (InkCairn’s reading: the rate the ATO’s resident rates table applies at your level of income). The ATO pages read for this guide describe no separate CGT rate for 2025-26.

One thing does not change this return: the 2026 CGT reform. The ATO’s own alert reads “Recent changes to capital gains tax (CGT) announced in the 2026–27 Federal Budget don’t apply to Tax Time 2026.” The 50% discount described below still applies to a 2025-26 return, and the section on the 2027 change says what is coming and what the ATO has not yet published.

This guide is for an Australian resident individual who sold or gave away shares or ETF units as an investor and is lodging their own return for the income year 1 July 2025 to 30 June 2026. It rests on ATO pages read in September 2026. InkCairn is an independent site, not the ATO and not a tax agent (see how guides are sourced), so where a step is InkCairn’s reading rather than something the ATO states, the guide says so. It cannot see your circumstances and is not personal tax or investment advice. Property, inherited assets and anyone who was not an Australian resident for tax purposes need the ATO’s own pages, starting with How to calculate your CGT. For when the return is due and what lateness can cost, see the 2025-26 lodgment deadline guide.

How the tax is worked out, in order

The order matters because losses come off before the discount. InkCairn’s summary of the ATO’s steps for a share investor:

1. Work out each parcel on its own. Capital proceeds minus the cost base is the capital gain. If the reduced cost base is more than the proceeds, it is a capital loss.
2. Subtract capital losses from the gains. This year’s losses first, then unapplied losses from earlier years. The ATO’s general page How to calculate your CGT says to subtract losses carried forward from earlier years first. Its 2025-26 myTax and supplementary return instructions, and its personal investors guide, apply this year’s losses first. This guide follows the 2025-26 instructions. Either way, both come off before the discount.
3. Halve what is left on gains from shares you owned at least 12 months, if you are an Australian resident for tax purposes. Gains on shares bought and sold within 12 months get no discount.
4. The result is your net capital gain. The ATO’s return labels use that name for the amount after losses and the discount. It is added to your assessable income and taxed at your marginal income tax rate.

No dollar amount of tax can be given without your other income, so this guide does not estimate one. The ATO examples used below stop at the net capital gain. For the rates themselves, read the 2025-26 resident rates table in the tax-free threshold guide.

When a sale or a gift counts in 2025-26

The ATO’s page on disposing of shares lists the ways to dispose of them: selling them, giving them away, transferring them to a spouse (the page gives the circumstances), share buy-backs, mergers, takeovers and demergers, and the company going into liquidation. myTax tells you to complete its capital gains section “if a capital gains tax (CGT) event happened in 2025–26”, so a CGT event between 1 July 2025 and 30 June 2026 is reported in this return. Which date counts for a late-June sale is covered below.

A gift is a CGT event too. The proceeds are the shares’ market value on the day of the gift. In the ATO’s example, shares bought for $45,000, brokerage included, on 4 January 2026 were gifted on 18 June 2026 when their market value was $50,000. The gain was $5,000, and because the shares were held for under 12 months the whole $5,000 is the net capital gain. Had they been held for 12 months, the ATO says the net capital gain would have been $2,500.

Shares acquired before 20 September 1985 are exempt from CGT, but the ATO still has you show the disposal in your return.

A sale close to 30 June 2026. The ATO’s CGT discount page says: “If there is a contract to sell the asset, the CGT event happens on the date of the contract, not when you settle.” The ATO’s own example of that rule is a property sale. None of the ATO pages read for this guide applies it to a share sale on the market, or names the date that decides the year for one, so InkCairn does not say. InkCairn’s suggestion: if a sale sits close to 30 June 2026 and settled after it, ask the ATO or a registered tax agent which year it belongs in before you lodge.

Cost base: what you subtract from the proceeds

The ATO says the cost base of your asset is what it cost you plus certain incidental costs of buying and selling it: brokerage or agent’s fees, legal fees and investment advisers’ fees, but not investment seminar costs. So brokerage on the purchase and on the sale both count. For shares, the cost base and the reduced cost base (the figure used to work out a loss) are generally the same.

• Parcels. The ATO says shares in the same company bought at different times are separate CGT assets, and you keep details for each parcel. If you have the records from your CHESS holding statement or your issuer sponsored statement, you can select which shares you sold and identify their cost. The ATO’s example has an investor choose to sell a parcel bought in 2025 in order to claim a capital loss in the 2026 income year. Not established: whether the ATO accepts first-in first-out or averaging when parcels cannot be told apart. The ATO page read covers only the case where you hold the records, so ask the ATO or a registered tax agent if you cannot identify what you sold.
• Dividend reinvestment. The ATO treats you as if you received a cash dividend and used it to buy more shares. Each share or parcel received that way is a separate asset with its own cost and date.
• Return of capital. A return of capital reduces your cost base. The ATO says that if a non-assessable payment is greater than the cost base or reduced cost base of your shares, you include the excess as a capital gain, and it is discounted if you held the shares at least 12 months.
• Records. The ATO says to keep them for 5 years from the time when no CGT event or further CGT event can happen to the asset.

The 50% discount and the 12-month test

The ATO’s rule: you can reduce your capital gain by 50% if both of these apply: you owned the asset for at least 12 months, and you are an Australian resident for tax purposes.

• How the 12 months is counted. The ATO says you must own it for at least 12 months before the CGT event happens, and that you exclude both the day of acquisition and the day of the CGT event. InkCairn’s suggestion: check the dates parcel by parcel, because each parcel has its own acquisition date, and ask about any sale near the anniversary of a purchase.
• Bought and sold within 12 months: no discount. The ATO’s instructions say you use one of three methods for each asset: indexation, discount, or the “other” method, and shares bought and sold within 12 months are in the last group.
• Residency. The ATO says the discount isn’t available to foreign and temporary resident individuals, and that a person who was a resident but had a period of non-residency after 8 May 2012 may get it on only part of the gain. This guide does not work out residency or that split.
• Older holdings. If you have owned an asset since before 21 September 1999, the ATO says you can index its cost for inflation instead of using the discount.

Capital losses

• A loss reduces gains, not salary. The ATO says you can’t deduct a capital loss from your assessable income, but in most cases it can reduce a capital gain you made in 2025-26.
• Only realised losses count. You can only claim a loss on shares or units you have disposed of, not a “paper loss” on shares you still hold.
• You cannot bank a current-year loss. The ATO says current year capital losses that can be applied to 2025-26 must be applied, and you can’t choose to defer to a later year an amount that can be applied this year.
• Earlier losses. You must apply unapplied net capital losses from earlier years in the order you made them. The ATO says there is no time limit on how long you can carry forward a net capital loss.
• Before the discount. Both kinds of loss come off the gains before the 50% is applied.
• Worthless shares. If during 2025-26 a liquidator or administrator declared the shares worthless, the ATO says you may claim a capital loss equal to their reduced cost base.
• Share trading as a business is outside this guide. The ATO says a loss made carrying on a business of share trading is a revenue loss.

One ATO example, worked through

The ATO’s supplementary return instructions for 2025-26 use an investor, Kathleen, to show the order. The dates and amounts below are the ATO’s.

Kathleen chooses to put the loss against the gain that gets no discount first. The ATO’s personal investors guide says you will probably get the greatest benefit by applying losses in this order: gains that get neither indexation nor the discount, then indexation gains, then gains the discount can apply to. The order within a year is your choice. She writes $1,260 at the Net capital gain label and $3,520 at the total current year capital gains label. Your own figures will differ, and InkCairn takes no view on them.

Reducing the tax: what the ATO describes, and its wash-sale warning

For a sale, the ATO describes these two reductions, and both are covered above: the 50% discount, when you meet both of its conditions, and capital losses, which are applied before it. This guide does not say they are the only ones. Whether to sell or hold is an investment decision that turns on more than tax, and InkCairn does not advise on it.

The wash-sale warning. In a 2022 media release, the ATO said wash sales “typically involve the disposal of assets such as crypto and shares just before the end of the financial year, where after a short period of time, the taxpayer reacquires the same or substantially similar assets.” It also said: “When the ATO identifies this behaviour, the capital loss is rejected.” The release is a media statement, not a ruling, and it is dated 2022, so treat it as the ATO’s stated position at that time. It refers to Taxation Ruling TR 2008/1. InkCairn did not open that ruling and does not describe its conditions. If you sold at a loss and bought the same or a similar holding back soon after, ask the ATO or a registered tax agent before you claim the loss.

ETF units and fund distributions

The ATO lists exchange traded funds (ETFs) among managed funds (unit trusts), and it treats units in a managed fund as CGT assets, so selling ETF units is a CGT event worked out like a share sale: proceeds, cost base, losses, then the discount if you meet both conditions.

Two differences are worth knowing before you start:

• Distributions can carry a capital gain. If a fund distributes a discounted capital gain to you, the ATO has you gross it up by multiplying it by 2 before applying losses and the discount. In its example, a distributed gain of $400 is grossed up to $800. On the paper return the ATO puts fund capital gains at the capital gains question (question 18), not at the partnerships and trusts question (question 13).
• The cost base can move each year. For a fund that is an attribution managed investment trust (AMIT), the ATO says your AMMA statement should show the AMIT cost base net amount and other information relevant to your cost base and reduced cost base.

In myTax, if your only capital gains are from managed funds or trusts and your current year capital gains are $10,000 or less, the ATO says you don’t need to complete the Capital gains or losses section.

Reporting the sale in your 2025-26 return

In myTax, the ATO’s 2026 instructions ask for three amounts: your Total current year capital gains (before losses and the discount), your Net capital gain (after losses and the discount), and your Net capital loss carried forward to later income years. myTax pre-fills share disposals and the loss carried forward from your 2024–25 return. You can use the ATO’s CGT record keeping tool instead of calculating by hand.

• Pre-fill. The ATO says you can’t delete information that is only pre-filled for share disposals, and to check for any other CGT event information that hasn’t pre-filled. Add any sale that is missing.
• Proceeds that do not match. The ATO says the capital proceeds your broker reports to the ATO aren’t reduced by brokerage, while the sale amount reported to you is. Its myTax example shows the two figures differing by the brokerage. InkCairn has not worked out from the pages read how to reconcile the two, so if your broker’s statement and the pre-fill differ, ask the ATO or a registered tax agent before you change either.
• The CGT schedule. The ATO says to complete it if your current year capital gain or loss is more than $10,000. Its schedule instructions use the same threshold in slightly different words, for total gains or total losses greater than $10,000, so a total of exactly $10,000 needs no schedule under either.
• On the paper return, capital gains are question 18: label G answers whether a CGT event happened, M is the exemption or rollover code, H is total current year capital gains, A is the net capital gain, V is net capital losses carried forward and X is the foreign resident withholding credit.

Medicare. This guide does not cover the Medicare levy or the surcharge; the Medicare levy and surcharge guide does. InkCairn did not establish from the ATO pages read here how a net capital gain counts towards income for surcharge purposes, so do not assume either way. Ask the ATO.

The 1 July 2027 change (future law, not this return)

This section is about law that starts later, and nothing in it applies to a 2025-26 return.

• Status. The ATO says the Government announced on 12 May 2026, in the 2026–27 Budget, that it would reform negative gearing and CGT arrangements, and that “these measures are now law”. Parliament’s bill page shows the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed both Houses and received assent on 26 June 2026 as Act No. 49.
• What starts on 1 July 2027. The ATO says the changes replace the 50% CGT discount for individuals, trusts and partnerships with cost base indexation and a 30% minimum tax rate on capital gains, and that the CGT reforms apply only to gains that accrue after 1 July 2027.
• What is not published. The ATO says resources will be available at a later date. It has not yet described how the new calculation works, so InkCairn does not say how a gain that accrues on either side of that date is split, or what tax it would produce.

For a sale in 2025-26, the discount described above is the rule.

If your position is unclear

InkCairn’s suggestion: ask the ATO or a registered tax agent before you lodge if a sale sits close to 30 June 2026, if you cannot identify which parcel you sold, if you were not an Australian resident for the whole time you held the shares, if you received a return of capital or a fund’s capital gain distribution, if your broker’s statement and the pre-filled proceeds differ, or if you sold at a loss and bought back soon after.

Left out on purpose: any estimate of tax on a gain, share trading as a business, property and inherited assets, the ATO’s deductible gift recipient rule for gifted shares, and how the post-July-2027 calculation will work.