Understanding capital gains tax and your super
13 February 2025
4
min read
Capital gains tax might sound complicated, but understanding how it works might help you save money and boost your retirement savings.
What is capital gains tax?
Capital gains tax is a tax you pay on the profit made when you sell or dispose of an asset. This could include things like property, shares, or crypto investments. The tax applies to the difference between what you paid for the asset and what you sold it for.
- If you sell an asset for more than you bought it for, you make a capital gain and it will increase the tax you need to pay.
- If you sell an asset for less, you make a capital loss. Losses can be used to offset gains in the same year or future years.
Important things to know about capital gains tax
- Although it's called 'capital gains tax', it's part of your income tax. It's not a separate tax.
- You need to include capital gains and losses and in your tax return with Australian Taxation Office (ATO) each year.
- If you've owned an asset for more than 12 months, you may be eligible for a 50% discount on the capital gain (for individuals) when calculating the tax you owe.
- There are some exemptions from capital gains tax, like the family home and other specific concessions for small businesses.
Keep in mind: ART isn't a tax agent and capital gains tax is a complex area. If you need advice, we recommend talking to a tax professional or the ATO. You can find more detailed information on the ATO website.
How do you pay capital gains tax?
Personal
Capital gains tax is part of your income tax and at your marginal tax rate. You pay this tax to the ATO as part of your end of financial year tax bill.
Super
Super funds pay capital gains tax at reduced rates. The capital gains tax is paid by the super fund, so you don't need to include the investment returns within your super in your own tax return each year.
What about capital gains tax in super?
Super funds often buy and sell investments to make money for their members. We call this money 'returns'. These returns include capital gains.
Super funds pay capital gains tax at a lower rate than individuals. You don't need to worry about paying capital gains tax within super, but it's helpful to understand how it works.
The capital gains tax on super is based on the super phase you're in. The two super phases are accumulation (during your working years) and retirement (pension).
Capital gains tax in the super accumulation phase
This phase happens while you're still working and growing your super balance. There's 15% capital gains tax on returns if your super is in the accumulation phase. This may be reduced to 10% if the super fund has owned the asset for 12 months or more.
Capital gains tax in the super retirement (pension) phase
This phase usually starts when you stop working and start taking money out of your super as regular income. There's no capital gains tax (0%) on super returns in this phase.
How you can grow your super and pay less tax
You can grow your retirement savings and potentially pay less tax by investing in your super (making voluntary contributions to your super).
You can use your take-home pay or savings to add after-tax contributions to super, or you can salary sacrifice to super to reduce your taxable income.
Check with your tax specialist or financial adviser about what is best suited to you and your current situation.
How to claim a tax deduction on money you add to your QSuper account
- You can add money to your super account from your savings or take-home pay (after-tax).
- Let us know you want to claim a deduction before you do your tax return or by 30 June the following year (whichever is earlier).
- Wait for us to get back to you.
- Add it to your tax return.
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There are strict rules for claiming a tax deduction for your super contributions. Remember to get professional advice or carefully read the rules to make sure you are eligible and it's right for you.
Case study example: Terri¹
Here's how personal capital gains are taxed and potentially reduced through making additional voluntary super contributions.
Terri is 40 years old, is self-employed and earns $100,000 per year (which puts them in the 32% tax bracket, including the Medicare levy of 2%). They have personal investments in shares, which they've held for over 12 months.
They sell some of their shares and make a capital gain of $10,000. With the 50% discount (because they owned them for over a year), the taxable capital gain goes down to $5,000. This amount is added to Terri's assessable income.
Terri's assessable income would change to $105,000, which means their marginal tax rate is 32% including the Medicare levy.
If Terri didn't do anything else, they would pay $1,600 in capital gains tax, which also includes the Medicare levy.
Terri decides to contribute extra money to super.
Terri chooses to add $5,000 to their super balance as an after-tax contribution. This means they can claim a tax deduction on this amount, which lowers their taxable income from $105,000 back to $100,000.
The $5,000 contribution is taxed at a lower super tax rate of 15%, which is $750.
This means Terri doesn't personally pay this amount, the super fund will pay it.
Terri reduces their taxable income and total tax bill, as well as growing retirement savings.
- By contributing to super, Terri moves the tax on $5,000 from their usual tax rate of 32% to the lower 15% super tax rate.
- This saves them $850 in tax (because the super fund will pay it as part of their capital gains tax), and has the added benefit of growing their super balance.
Keep in mind: There are limits to the amount you can add to your super known as contributions caps. You usually can't access your super until you reach age 60 and retire. Always check the current rules and your situation before making decisions.
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1. Terri is not a real member and the case study assumes they have no other income or deductions. This case study has been provided for illustrative purposes and uses general information only. It's not based on your personal objectives, financial situation or needs. Consider your own situation and goals to decide what's right for you.
2. You can find out more about financial advice options at qsuper.qld.gov.au/advice or by calling us on 1300 360 750. Employees in the Australian Retirement Trust group provide advice to members and employers as representatives of QInvest Limited. QInvest Limited (ABN 35 063 511 580, AFSL 238274) is wholly owned by the Trustee as an asset of Australian Retirement Trust. QInvest Limited (ABN 35 063 511 580, AFSL 238274) is a separate legal entity responsible for the financial services it provides. Eligibility conditions apply. Refer to the Financial Services Guide (pdf) for more information.