Capital Gain Tax in ASX Shares Trading

Share Traders are taxed differently to share Holders. The best way of looking at it is that share traders buy and sell shares to profit, whereas share holders buy shares as an investment.

  • Share HOLDERS:

Purchase shares for the purpose of gaining dividend income rather than making a profit from buying and selling shares. Profits made on shares are not classed as assessable income, but as a capital gain and are subject to capital gains tax.

If the shares have been held for more than 12 months then they are eligible to receive the 50% capital gains discount. That means you only pay tax on half of the capital gain made. This is a major tax perk for the share holder.

  • Share TRADERS:

The biggest stumbling block from being accepted as running a share trading business is the volume of trades you make each year. Generally speaking, the more trades you make the greater the chance of being accepted as a share trader.

The ATO writes: “The amount of capital that you invest in buying shares is not considered to be a crucial factor in determining whether you are carrying on a business of share trading. This is an area in which it is possible to carry out business activities with a relatively small amount of capital. Conversely, you may also invest a substantial amount of capital and not be considered to be a share trader.”

The advantages of being a share trader

• Share traders can offset any trading losses incurred over the financial year against other assessable income.

​• Any profits made by the share trader are regarded as assessable income, and all costs incurred in running the business are deductible..

• The bad news is that you can’t take advantage of the 50% capital gains discount on shares held for more than 12 months.


Basically, if you buy shares for one price and sell them for another price then the difference between the two is your capital gain or loss.

In the event you receive more for your shares than you paid for them, you'll have made a capital gain and you may need to pay tax on it.

The amount of tax you pay on your capital gain depends on a number of things, including:

  • how long you owned the shares - individuals can usually discount a capital gain by 50% if you have held the asset for more than 12 months.

  • what your marginal tax rate is

  • whether you have also made any capital losses

+ if you make a capital loss, you can use it to reduce a capital gain in the same income year.

+ if your capital losses are greater than your capital gains or if you make a capital loss in a financial year in which you don’t make a capital gain, you generally can carry the loss forward and deduct it against your capital gains in future years.

Your marginal tax rate is important because your capital gain will get treated in the same way as any other income on your tax return for that year.

Work out which methods you can use

Capital gain or capital loss worksheet


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