Selling in a High-Income Year vs a Low-Income Year
The same capital gain can result in very different tax bills depending on your other income that year. Selling when your income is lower means the gain is taxed at a lower marginal rate.
This scenario is relevant if you're planning a career break, expecting parental leave, transitioning to retirement, or simply have a year with unusually high or low income. The asset and gain are identical—only your other income changes.
Why this matters
Many people focus on the asset itself and forget that CGT is added to your taxable income. A $30,000 capital gain on top of $150,000 income is taxed at the top marginal rate (37% or 45%). The same gain on top of $45,000 income might be taxed at 30% or less.
The tax brackets don't change—but where your gain lands within them does.
What most people get wrong
Assuming CGT is a flat rate. Unlike company tax, CGT for individuals uses your marginal rate. The first dollar of your capital gain is taxed at the rate where your other income left off. If you're already in the top bracket, every dollar of the gain is taxed at that rate.
Forgetting the 50% discount still applies. Holding for 12+ months halves the taxable gain regardless of your income level. But after the discount, the remainder is still taxed at your marginal rate—so income timing still matters.
Scenario A: High-income year
Scenario B: Low-income year
Applies to both scenarios
0 months after Scenario A
Scenario A
High-income year2025-26 Capital Gains Tax rates
Tax Comparison
Scenario B
Low-income year2025-26 Capital Gains Tax rates
Tax Comparison
This calculator provides estimates only and does not constitute financial advice. Actual amounts may vary based on individual circumstances. Consult a registered tax agent for personalised guidance.
How to use this comparison
- Review the pre-filled scenarios — we've set up realistic defaults for comparison
- Adjust the numbers — enter your actual purchase price, sale price, and dates
- Compare the results — see the tax difference highlighted at the top
- Share or bookmark — the URL updates as you change inputs
How Capital Gains Tax Works
When you sell an asset for more than you paid, the profit is a capital gain. In Australia, this gain is added to your taxable income and taxed at your marginal rate. The amount of tax you pay depends on your total income that year, how long you held the asset, and whether any exemptions apply.
Key factors affecting your CGT
- Holding period: Assets held for 12+ months qualify for the 50% CGT discount, halving your taxable gain
- Your income: Higher income means a higher marginal tax rate on your capital gains
- Asset type: Your main residence is generally CGT-free; investment properties and shares are not
- Cost base: Includes purchase price plus costs like stamp duty, legal fees, and improvements
Use the calculator above to model your specific situation. Adjust the inputs to see how different scenarios affect your tax outcome.
FAQ
Does my other income affect how much CGT I pay?
Yes. Capital gains are added to your taxable income and taxed at your marginal rate. Higher other income means more of your gain is taxed at higher rates. Lower other income means more of your gain falls into lower tax brackets.
Should I wait for a low-income year to sell?
It depends on the tax savings vs the cost of waiting. If you're about to take a career break or retire, the timing might naturally align. But don't hold an asset purely for tax reasons if you need the funds or the investment no longer suits your goals.
What counts as a low-income year?
Any year where your taxable income is lower than usual—parental leave, study leave, sabbatical, part-year work, transition to retirement, or a gap between jobs. The tax brackets for 2025-26 are: 0% up to $18,200, 16% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above that.
Can I split a large gain across two financial years?
Not from a single sale—the entire gain falls in the year of sale. However, if you have multiple assets, you can sell some before 30 June and some after to spread gains across two years.
Does the 50% CGT discount still apply in a low-income year?
Yes. If you've held the asset for at least 12 months, you get the 50% discount regardless of your income level. The discounted amount is then added to your other income and taxed at your marginal rate.
Disclaimer
This tool provides estimates only and does not constitute financial advice. Investment decisions should not be based solely on tax considerations. Market conditions, investment goals, and personal circumstances all play a role.
Before making decisions about selling assets, consult a registered tax agent or licensed financial adviser.