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10 Common Myths About Capital Gains Tax

Capital Gains tax in words next to pen, calculator and magnifying glass

Capital Gains Tax (CGT) can often be a source of confusion for many taxpayers. With various misconceptions surrounding CGT, it’s important to separate fact from fiction. In this blog, we debunk 10 common myths about Capital Gains Tax and provide clarity on this crucial aspect of taxation.

1. Myth: CGT is a Separate Tax

Fact: Capital Gains Tax is not a standalone tax but part of your income tax. It’s calculated on the net capital gains (the difference between your capital proceeds and the cost base of your asset) and added to your other taxable income.

2. Myth: All Property Sales Attract CGT

Fact: The main residence exemption can exempt your home from Capital Gains Tax. However, if you’ve used part of your home for income-generating purposes or it’s not considered your primary residence for a portion of the ownership period, CGT might partially apply.

3. Myth: Inherited Properties are CGT Free

Fact: While inheriting property isn’t a Capital Gains Tax event, selling it later is. The key is the property’s cost base, often the market value at the time of inheritance, especially if the deceased didn’t use it as their primary residence.

4. Myth: CGT is Charged at a Flat Rate

Fact: Capital Gains Tax is calculated based on your marginal tax rate. The gain is added to your income, potentially pushing you into a higher tax bracket.

5. Myth: Business Assets Are Exempt from CGT

Fact: Business assets can attract Capital Gains Tax, but small businesses may access concessions like the 15-year exemption, 50% active asset reduction, and retirement exemption, which can significantly reduce CGT.

6. Myth: All Personal Assets Are Exempt

Fact: While many personal assets are Capital Gains Tax-exempt (like your car, furniture or other assets costing $10,000 or less), some, such as collectibles or personal use assets valued over a certain threshold, can attract CGT.

7. Myth: You Always Pay CGT on Shares

Fact: Capital Gains Tax on shares depends on whether there’s a capital gain or loss. Keeping accurate records of acquisition costs and understanding the market trends are vital for calculating potential CGT on shares.

Man doing house renovations that may have an affect on capital gains tax

8. Myth: Renovations Always Increase CGT

Fact: While major renovations can increase the cost base, thereby potentially reducing the Capital Gains Tax, this isn’t always the case. It depends on the nature and value of the renovations.

9. Myth: CGT Discount is Automatic

Fact: The 50% Capital Gains Tax discount for assets held longer than 12 months is not automatically applied. You must meet specific criteria, and it’s only available to Australian residents for tax purposes.

10. Myth: You Can’t Reduce CGT Liability

Fact: There are legal ways to reduce Capital Gains Tax, like timing the sale of an asset, keeping accurate records to increase the cost base, or using capital losses to offset capital gains.


Understanding Capital Gains Tax is crucial for effective financial planning. By debunking these myths, we hope to provide a clearer picture of how CGT works and help you make more informed decisions. Always consider seeking professional advice to navigate the complexities of Capital Gains Tax and optimise your tax situation.  You can also use TaxTank to manage your CGT obligations.  With our built in smart calculations, it takes the guesswork out of manually calculating CGT.


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Important Tax Deadlines

For all incomes earned between 01 July 2023 – 30 June 2024.  

Tax returns can be lodged from 01 July 2024. You can prepare early with TaxTank so you know exactly what’s going on ahead of time.

For all incomes earned between 01 July 2022 – 30 June 2023.  

Tax returns are now OVERDUE.  

You can use TaxTank to get up to date and lodge with our partner accountants.

Tax returns are OVERDUE.  

You can use TaxTank to get up to date and lodge with our partner accountants.

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