CGT on ETFs in Australia: How Capital Gains Tax Works When You Sell (2026)

Capital gains tax on ETFs in Australia is triggered when you sell — not when your ETF grows in value. Every year your ETF increases in value without you selling, that gain is unrealised and untaxed. The tax event only happens at the moment of sale.

This guide explains exactly how CGT works on ETFs, how to calculate what you owe, how the 50% discount works, how to track your cost base across years of contributions and DRIP acquisitions, and the most effective strategies to reduce your CGT liability.

Use the Capital Gains Tax Calculator to estimate your CGT before selling.

Quick answer: CGT on ETFs = (sale proceeds − cost base) × 50% (if held > 12 months) × your marginal tax rate. On a $200,000 sale with a $80,000 cost base, the capital gain is $120,000. After the 50% discount: $60,000 included in income. At 37% marginal rate: $22,200 CGT. Net proceeds after CGT: $177,800.

When Does CGT Apply to ETFs?

CGT is triggered by a CGT event — the ATO's term for an event that crystallises a capital gain or loss. For ETF investors, the main CGT events are:

CGT Event A1 — Disposal of an asset: You sell your ETF units. This is the most common CGT event for ETF investors.

CGT Event E4 — Non-assessable payments reducing cost base: When your ETF distributes tax-deferred or tax-free amounts, these reduce your cost base (but are not taxable in the current year). This is not a CGT event itself but affects future CGT calculations.

CGT Event E8 — DRIP acquisitions: Each DRIP acquisition is itself a CGT asset with its own cost base and acquisition date. When you eventually sell, each DRIP parcel is a separate CGT calculation.

What does NOT trigger CGT:

Your ETF growing in value (unrealised gain — not taxable)
Receiving distributions (these are income tax events, not CGT events)
Transferring between brokers (in-specie transfers between CHESS-sponsored accounts with the same HIN — check with your broker)

How to Calculate CGT on an ETF Sale

Step 1: Identify the Capital Gain

Capital gain = Sale proceeds − Cost base

Sale proceeds: The amount you receive from selling (total units sold × price per unit), less any brokerage paid on sale.

Cost base: What you originally paid for the units, including:

Purchase price at acquisition
Brokerage paid on purchase (added to cost base)
DRIP acquisitions (each at their acquisition price)
Less any tax-deferred amounts received over the holding period (these reduce cost base)

Step 2: Apply the 50% CGT Discount (If Eligible)

If you have held the ETF units for more than 12 months before selling, the 50% CGT discount applies:

Discounted capital gain = Capital gain × 50%

This is the most valuable tax concession available to long-term investors. It effectively halves your CGT rate.

12 months is calculated from the day after acquisition — not a calendar year. If you bought on 15 March 2024, you must sell on 16 March 2025 or later to qualify.

DRIP parcels: Each DRIP acquisition has its own 12-month clock. Units reinvested in July 2023 are eligible for the discount; units reinvested in January 2026 are not (if you sell before January 2027). This is why DRIP creates complexity at sale time — multiple parcels with different eligibility dates.

Step 3: Add to Your Income and Apply Marginal Rate

CGT payable = Discounted capital gain × (Marginal rate + Medicare Levy)

The capital gain (after the 50% discount) is added to your other income for the year and taxed at your marginal rate. There is no separate CGT rate in Australia.

This means the year you sell matters. If you sell in a year when your other income is lower (e.g. parental leave, career break, partial year of income), your marginal rate on the gain is lower.

Worked Examples

Example 1 — Single Lump Sum Investment, Sold After 3 Years

Bought: $50,000 of DHHF in June 2022 (plus $9.50 brokerage)
Sold: $84,000 in July 2025 (minus $9.50 brokerage)
Holding period: 3 years 1 month → eligible for 50% discount
Salary income this year: $110,000 (marginal rate 30%)

Cost base: $50,000 + $9.50 = $50,009.50 Sale proceeds: $84,000 − $9.50 = $83,990.50 Capital gain: $83,990.50 − $50,009.50 = $33,981 After 50% discount: $33,981 × 50% = $16,990.50 CGT payable: $16,990.50 × 32% (30% + 2% Medicare) = $5,437 After-tax proceeds: $83,990.50 − $5,437 = $78,553

Without the 50% discount: $33,981 × 32% = $10,874 in CGT — the discount saves $5,437.

Example 2 — Regular DCA Investor, Mixed Eligibility

You have been buying $1,000 of VGS monthly for 18 months. You sell everything today.

6 oldest parcels (bought > 12 months ago): eligible for 50% discount
12 newest parcels (bought < 12 months ago): not eligible

For this investor, it is worth waiting — once the newest parcels hit 12 months, all parcels are eligible and the CGT bill is halved on the remaining short-term gains.

Example 3 — Partial Sale

You hold $200,000 in VDHG (all eligible for 50% discount) and need $50,000. You sell $50,000 worth.

Using the first-in, first-out (FIFO) method by default (or specific identification if you choose):

Your earliest parcels are used first (most likely the largest unrealised gain)
If the earliest parcel's cost base is, say, $20,000 and you sell $50,000 worth: gain = $30,000
After 50% discount: $15,000 taxable
At 39%: $5,850 CGT

Alternative: You can choose which parcels to sell (specific identification) — selling the most recently purchased parcels (highest cost base, smallest gain) minimises current-year CGT. This requires proper record-keeping and instruction to your broker at the time of sale.

Cost Base Tracking: The Critical Discipline

Your cost base is the foundation of every CGT calculation. Getting it wrong means either overpaying tax (if you understate your cost base) or underpaying (if you inflate it — which attracts ATO attention).

What forms part of your cost base:

Purchase price (including brokerage on purchase)
DRIP acquisitions (each at their acquisition price)
Less: tax-deferred distributions received over the holding period

What reduces your cost base:

Tax-deferred amounts from annual ETF tax statements
Tax-free amounts from annual ETF tax statements

How to track it: Most brokers (Pearler, CommSec, Selfwealth) automatically track your cost base per parcel including DRIP acquisitions. Export your portfolio report at year end to verify. For investors managing this manually, a simple spreadsheet with columns for date, units acquired, price per unit, and source (purchase vs DRIP) is sufficient.

If you have never tracked cost base and have held ETFs for many years, your broker's historical transaction data is the starting point. The ATO's myTax system also contains historical purchase data for CHESS-sponsored holdings.

Strategies to Minimise CGT

1. Hold for more than 12 months (free) The 50% CGT discount is the single most impactful action — it halves your effective CGT rate. Never sell within 12 months of purchase if you can avoid it.

2. Sell in a low-income year The capital gain is taxed at your marginal rate for the year of sale. If you sell in a year when your income is lower — parental leave, career break, early retirement before super access at 60 — your marginal rate is lower and CGT is reduced.

3. Offset gains with losses If you have capital losses (from other investments, including ETFs that lost value), these offset your capital gains before the 50% discount is applied. You can carry forward unused losses indefinitely.

4. Use specific parcel identification Rather than defaulting to FIFO, identify which parcels to sell. Selling parcels with the highest cost base (smallest gain) minimises current-year CGT while preserving lower-cost-base parcels for future years.

5. Partial sales over multiple tax years Rather than selling a large holding in one year, sell portions across two or three financial years. This spreads the taxable gain across years, potentially keeping you in a lower marginal rate bracket each year.

6. Super for long-term holdings ETF gains within superannuation are taxed at 15% (or 10% after the 12-month discount at the fund level) — significantly less than personal marginal rates of 30–45%. For long-term wealth building, holding ETFs inside super reduces the eventual CGT burden substantially.

Frequently Asked Questions

How much CGT do I pay when I sell ETFs in Australia?

CGT = capital gain × 50% (if held > 12 months) × your marginal tax rate. On a $100,000 gain at 37% marginal rate + 2% Medicare: $100,000 × 50% = $50,000 discounted gain × 39% = $19,500 CGT. Use the Capital Gains Tax Calculator to calculate your specific position.

Do I pay CGT on ETFs every year?

No. CGT is only triggered when you sell ETF units. Annual growth in your ETF value is unrealised and untaxed. You do pay income tax on distributions each year (separate from CGT), but the capital gain itself is only taxed at the time of sale.

What is the 50% CGT discount for ETFs?

The 50% CGT discount allows you to exclude 50% of a capital gain from your assessable income if you have held the asset for more than 12 months. It effectively halves your CGT rate. On a $100,000 gain, only $50,000 is taxable. At 39% marginal rate, you pay $19,500 in CGT instead of $39,000. It is the most valuable tax concession for long-term investors.

How do I calculate my cost base for ETFs?

Your cost base = total purchase price paid (including brokerage) + value of all DRIP acquisitions − any tax-deferred and tax-free amounts received over the holding period. Your broker tracks this automatically for CHESS-sponsored holdings. Check your broker's portfolio report or cost base report for the current figure.

Can I offset ETF capital gains with losses?

Yes. Capital losses from any CGT asset (shares, ETFs, property, other investments) offset capital gains before the 50% discount is applied. Unused losses carry forward indefinitely. You cannot deduct capital losses against ordinary income — only against capital gains.

What if I sell ETFs in the same year I retire?

The year of retirement is often a low-income year — particularly if you retire before 60 (when super is still inaccessible). This can make it an ideal year to trigger capital gains at a lower marginal rate. Plan any large ETF sales with your tax situation for the full year in mind.

General information only. Not financial advice. Consult a registered tax agent for advice specific to your situation.