Selling shares feels like it should be simple — you bought at one price, sold at another, and the difference is the story. Tax-wise, that's mostly true, but a few details trip people up every year, usually around timing and what actually counts as "selling."
When does CGT apply?
A capital gains tax event happens when you dispose of shares — which almost always means selling them, but also includes things like a company being taken over and your shares being cancelled for a payout. It doesn't include simply watching the value go up or down on paper; you only need to think about CGT once you actually sell (or otherwise dispose of) the shares.
Working out the gain (or loss)
At its simplest: your capital gain is the sale price minus your cost base. Your cost base isn't just what you paid for the shares — it also includes brokerage fees on the purchase and sale, and in some cases other costs of owning them. Keeping your contract notes (purchase and sale) is the easiest way to get this right without guesswork.
If the shares sold for less than they cost, that's a capital loss — which can't reduce your income tax directly, but can offset capital gains in the same year, or be carried forward to offset gains in future years indefinitely. Worth remembering if you're thinking about selling an underperforming holding.
The 50% discount
If you're an individual and you held the shares for more than 12 months before selling, you can generally discount the taxable gain by 50%. This is one of the most valuable — and most missed — pieces of the puzzle, because it applies automatically once the 12-month test is met; there's nothing extra you need to do except hold the correct dates on record.
A practical tip: if you're close to the 12-month mark and thinking about selling, it's worth checking the exact purchase date before you do — a few days either side of 12 months can be the difference between paying tax on the full gain or half of it.
Dividend reinvestment plans (DRPs) — the one that catches people out
If you're in a dividend reinvestment plan, each parcel of shares you receive through it has its own purchase date and cost base — even though it might feel like one continuous holding. When you eventually sell, you may be selling several different "parcels" with different purchase dates, and the 12-month discount applies parcel by parcel, not to the holding as a whole. This is the single most common share CGT issue we see, and it's easy to get wrong without the right records.
What to bring if you've sold shares this year
- Contract notes for every purchase and sale
- A summary from your broker or share registry, if available
- Details of any DRP participation
- Records of any capital losses from previous years you're carrying forward
This is general information, not personal advice for your situation — the right numbers depend on your full trading history. [Book a Consultation] and we'll work through your specific gains and losses together.