Tax Implications for Selling Shares Under 12 Months in Australia
- Jenine L.
- 4 days ago
- 2 min read
The timing of when you sell your shares has a direct impact on your tax bill. In Australia, whether you’ve held shares for less than or more than 12 months determines if you qualify for the capital gains tax (CGT) discount.
How Capital Gains Tax Works in Australia
When you sell shares for more than you paid, the profit is a capital gain. This is added to your assessable income and taxed at your marginal tax rate.
Capital losses can offset capital gains but cannot be used against wages or salary.
Losses are applied before any CGT discount is calculated.
Selling Shares Within 12 Months: No CGT Discount
If you sell shares within 12 months of acquisition, you are not eligible for the 50% CGT discount. The full gain is included in your taxable income.
Example:
You buy shares for $10,000 and sell 6 months later for $15,000.
Capital gain: $5,000.
The full $5,000 is added to your taxable income and taxed at your marginal rate.
Important: The ATO counts 12 months from the day after acquisition to the day before the CGT event. For contracts, the CGT event happens on the contract date, not settlement.
Selling Shares After 12 Months: CGT Discount May Apply
If you hold shares for 12 months or longer:
Individuals and trusts can reduce the capital gain by 50%.
Complying super funds receive a 33⅓% discount.
Companies are not entitled to any CGT discount.
Foreign and temporary residents may be restricted from claiming the discount.
Example:
Buy for $10,000, sell 18 months later for $15,000.
Capital gain: $5,000.
Discounted gain: $2,500.
Only $2,500 is included in assessable income.
Investor vs Trader Rules
Investors: Profits are capital gains, and CGT rules apply.
Share traders: Treated as a business; profits are ordinary income, losses are deductible, and the CGT discount does not apply.
Dividends and Franking Credits
Dividends remain assessable as ordinary income in the year received, separate from CGT. Franking credits may reduce your tax liability but are not connected to share sale timing.
Beware of Wash Sales
If you sell shares at a loss and repurchase the same or substantially identical shares shortly after, the ATO may treat this as a wash sale and deny the loss.
Quick Comparison: Under 12 Months vs 12+ Months
Holding Period | Tax Treatment | Discount Available | Example (Gain $5,000) |
Less than 12 months | Full gain taxed at marginal rate | No | $5,000 added to taxable income |
12 months or more | Discounted gain taxed at marginal rate | Yes (50% individuals/trusts, 33⅓% super funds, none for companies) | $2,500 added to taxable income (individuals) |
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
