Corporate gains tax: company discounts and gain calculations

A company can’t claim the standard 50% CGT discount available to eligible individuals. For corporate gains tax in Australia, a company’s net capital gain is included in its assessable income and taxed at the applicable company tax rate.

The distinction can be easy to miss, especially when a company has held an asset for years. Corporate gains tax follows different rules from an individual’s CGT, although capital losses and small business CGT concessions may still affect the result.

This guide explains how companies calculate capital gains and losses, including how sale proceeds and an asset’s cost base affect the calculation. You’ll also learn how capital losses can reduce gains, when small business concessions may apply, and why those concessions are different from the 50% discount. With the key rules laid out clearly, you can better understand what a company’s asset sale may mean for its tax position.

What is a capital gain or capital loss?

A capital gain generally arises when a company disposes of an asset for more than its cost base. A capital loss arises when the proceeds are lower. Both may affect the company’s taxable income.

Gains and Losses on Asset Disposals

A disposal includes selling, gifting, swapping, or losing an asset, not only receiving cash for it. Selling commercial premises or a business can therefore create a capital gain if the proceeds exceed the asset’s cost base. For example, sale proceeds, purchase costs and capital improvements all help establish the result. A capital loss can reduce capital gains, but cannot offset other income. Accurate records help show how each figure was reached.

Taxable Assets and Exemptions

Australian CGT generally applies to assets acquired on or after 20 September 1985, including company-held property and shares. Certain exceptions apply: personal-use assets costing less than A$10,000 are generally exempt, as are certain collectibles bought for A$500 or less. An individual’s main residence may also be exempt, while business depreciating assets are generally outside CGT unless used privately or for another non-taxable purpose. A gift or transfer can still trigger a CGT event. Trust distributions may pass capital gains to beneficiaries, affecting their taxable income. These distinctions matter when identifying which assets and taxpayers the calculation concerns.

Company CGT Treatment and Reporting

A company doesn’t receive the standard 50% discount available to eligible individuals. Its net capital gain is included in assessable income and taxed at the applicable company rate. A company reports the gain in its income tax return for the income year of the CGT event, with payment following its applicable tax payment arrangements. Incorrect reporting can understate taxable income and create a tax shortfall; interest or penalties may also apply. The outcome depends on the circumstances and the error. Some small businesses may qualify for separate CGT concessions, subject to eligibility rules. For a clear record of the calculations and reporting, businesses can use company tax support.

CGT calculations

Start with the CGT event, such as an asset sale, then compare the capital proceeds with the asset’s cost base. The difference is the initial capital gain or loss. For a company, the net capital gain is included in assessable income, so it forms part of the taxable income calculation rather than a separate tax bill.

For example, an investment property bought for A$500,000, improved for A$20,000 and sold for A$600,000 has a stated capital gain of A$80,000. The arithmetic is sale proceeds less purchase price and improvements. This example shows why the sale price alone doesn’t tell you the taxable amount. Relevant costs and the asset’s history can change the calculation.

For a reliable calculation, organise the records by asset:

• Purchase documents show the acquisition price and date.
• Invoices help identify capital improvements and eligible ownership costs.
• Sale contracts and agent records support the capital proceeds and selling expenses.
• Prior-year tax records can show capital losses available to apply.

Then apply eligible capital losses against capital gains. A net capital loss can generally be carried forward to reduce capital gains in a later year, but it cannot offset other income. Track capital losses separately from ordinary business expenses, as they affect taxable income differently. The amount left after eligible losses is the net capital gain included in assessable income.

Indexation may also affect certain company assets. For corporate CGT assets acquired before 21 September 1999, the cost base is indexed for price movements measured by CPI until 30 September 1999. Australia doesn’t index the cost base for price movements from 1 October 1999. The acquisition date therefore matters when calculating an older asset’s gain.

Finally, check whether a discount or concession applies before using the net figure in company taxation. Companies can’t use the standard 50% CGT discount for individuals, while eligible small businesses may have separate concessions. The asset type, ownership period, records and business eligibility determine the calculation. Keep the supporting documents with the working papers, so each amount can be traced to its source.

How are capital gains taxed when a company sells shares or property?

When an Australian company sells shares or property, its net capital gain is added to assessable income and taxed at the applicable company rate. Companies can’t claim the standard 50% CGT discount available to eligible individuals. The result forms part of the company’s income tax calculation, rather than a separate capital gains tax charge.

The general company tax rate is 30%. An eligible company may qualify for the 25% base rate, depending on its structure and income. The company and certain connected entities must have aggregated turnover below A$50 million, and specified passive income must be no more than 80% of total assessable income for the year. These tests affect the rate applied to taxable income, including a net capital gain.

For property, the calculation is based on the company’s asset and the proceeds from its disposal. Selling commercial property can result in a gain even if the proceeds are reinvested in another business asset. Purchase records, improvement costs and sale documents help establish the relevant figures. The income year of the CGT event determines when the gain is reported in the company’s tax return.

For share sales, first establish who owns the shares. If a company sells shares it holds as an asset, the sale may create a company capital gain. If an individual sells shares in their company, those shares belong to the individual, so the CGT event concerns the individual’s asset. The seller determines whose tax return reports the result.

A specific reduction may apply when an Australian company sells shares in a foreign company. To qualify, the Australian company must have held a direct voting percentage of at least 10% for a specified period before the CGT event. This is a targeted rule, not the general individual discount. Identify the legal owner, asset type, acquisition records and any relevant company-rate tests before calculating the taxable amount. Those details determine how the sale flows into company income tax.

What are the CGT rules for small business companies in Australia?

Australia’s small business CGT concessions may allow an eligible business to disregard or defer some capital gains. These concessions are separate from the standard individual discount. Eligibility depends on the business, asset and sale, so check the relevant tests before relying on a concession in your calculation.

The basic eligibility tests include the small business turnover test and the maximum net asset value test. The turnover threshold is less than A$2 million. A business above that turnover may still qualify if the net value of its relevant assets is less than A$6 million just before the sale. These tests help establish whether concessions are available, but the asset must also meet the rules for the specific concession.

For an eligible active business asset, the 50% active asset reduction may reduce a gain after capital losses have been applied. The asset generally needs to have been owned for at least 12 months. A small business rollover can instead defer all or part of a gain for two years, or longer in specified circumstances, if the business acquires a replacement active asset or makes capital improvements to one.

The retirement exemption can disregard capital gains up to a lifetime limit. According to the Australian Taxation Office, the small business retirement exemption allows capital gains of up to A$500,000 to be disregarded over a lifetime. A person under 55 using this exemption must pay the exempt amount into a complying superannuation fund or retirement savings account. The 15-year exemption has its own conditions, including continuous ownership for at least 15 years, age 55 or over, and retirement or permanent incapacity.

Keep the sale records, ownership history and asset details together to assess each concession accurately. For help applying the rules to a planned business sale, review your business tax position with an adviser.

ASAP Solutions: Business Tax Services

ASAP Solutions helps businesses organise records and tax reporting for asset sales. Its Business Tax Services support companies with capital gain calculations, company tax returns and the records needed to explain the figures.

Consider support if your company sells shares or property, carries forward capital losses, or is assessing small business CGT concessions. Clear bookkeeping helps trace purchase costs, improvements and sale proceeds. Bookkeeping & Payroll can support the wider financial records behind these calculations.

Bring the asset documents and relevant business records together to make the discussion practical. To talk with ASAP Solutions about your business tax needs, contact the team.

Prepare your next business decision with confidence

A planned asset sale can affect cash flow, recordkeeping and future business decisions. Consider its corporate gains tax implications as part of your wider goals, so tax planning supports the direction you want your business to take.

Before deciding, gather the business records and questions relevant to your plans. A focused review can clarify how the transaction fits your next steps and help you stay focused on running the business.

Contact ASAP Solutions for tax advice and move forward with a clearer plan.

Frequently Asked Questions

Can a company get the 50% CGT discount like individuals?

No. Australian companies can’t claim the standard 50% CGT discount available to eligible individuals. Holding shares or property for an extended period doesn’t make a company eligible for that individual discount. An eligible small business may instead qualify for separate concessions, such as the active asset reduction. Those concessions have their own requirements and aren’t the same as the individual discount.

Which Company Assets Are Subject to CGT?

Company-owned land, commercial premises and shares may be subject to CGT when the company disposes of them. First identify the legal owner: an asset held by the company is distinct from shares held personally by a shareholder. Business depreciating assets are generally exempt from CGT unless used for private or another non-taxable purpose. The asset’s type and use can therefore affect its tax treatment.

Can CGT rules change?

Yes. Australian CGT rules can change, so acquisition and disposal dates matter. From 1 July 2027, the 50% capital gains tax discount will be replaced by a discount based on inflation. The timing of a disposal may affect how capital gains are treated under the changes. For an asset owned earlier and sold afterward, the gain is apportioned between the discount for growth until 30 June 2027 and indexation for later growth.

Can capital losses be used to reduce tax?

Yes. Capital losses can reduce capital gains, but cannot offset ordinary company income. If a company makes a loss disposing of one asset, it can generally carry the net capital loss forward to reduce capital gains in a later year. Keep loss calculations and supporting asset records separate from operating expenses so each amount is tracked correctly.

Does CGT apply when I sell shares in my own company?

Yes. If you personally own and sell shares, the CGT event relates to your shares, not an asset owned by the company. The company does not report your personal share sale as its own disposal. Conversely, if the company sells shares it owns in another entity, that disposal is considered in the company’s tax position.

What is corporate gains tax in Australia?

Corporate gains tax describes how Australia’s income tax rules apply to a company’s capital gain. It is not a separate tax: the company’s net capital gain is included in assessable income and taxed at the applicable company rate. For example, a gain from selling company-owned premises affects the company’s income tax calculation for the income year in which the disposal occurs.