CGT Discount vs Indexation Method Australia (2025–26)

When you sell a CGT asset that you have held for more than 12 months, you may be eligible for a CGT discount that reduces the amount of your gain that is taxable. For assets acquired before 21 September 1999, you can also choose the indexation method and use whichever gives you a lower tax outcome.

This guide explains both methods and shows worked examples comparing them.

Calculate now: The Capital Gains Tax Calculator automatically compares both methods for eligible assets.

The 50% CGT discount

Who is eligible

Entity	Discount	Condition
Individual	50%	Held 12+ months, Australian resident
Trust	50%	Flows through to eligible beneficiaries
SMSF	33.33% (one-third)	Complying super fund, held 12+ months
Company	Not eligible	Companies never receive the discount
Foreign resident individual	Not eligible	Since 8 May 2012 for gains after that date

How the discount is applied

The discount is applied after capital losses are subtracted:

Step	Amount
Gross capital gain	$100,000
Minus capital losses	−$20,000
Gain after losses	$80,000
50% discount	−$40,000
Net capital gain	$40,000

If you apply the discount before losses, you get a different (incorrect) answer. The ATO requires losses first, discount second.

The indexation method

Who can use it

The indexation method is only available for assets acquired before 11:45 am AEST on 21 September 1999. For most people today, this means:

Property held since the 1990s
Shares purchased in the 1990s or earlier
Other CGT assets acquired before that date

How it works

Instead of applying a percentage discount, the indexation method adjusts your cost base for inflation using the Consumer Price Index (CPI). The adjustment uses CPI values up to the September 1999 quarter — no further indexation is applied after that date, regardless of when you sell.

Formula:

Indexed cost base = Original cost base × (CPI for Sep 1999 quarter ÷ CPI for acquisition quarter)

CPI reference values

Quarter	CPI (All Groups, weighted average of eight capital cities)
Sep 1985	71.3
Sep 1990	100.0
Sep 1995	119.8
Sep 1999	128.5

The full CPI table is available from the ABS (Series A2325846C).

Worked example — comparing both methods

Scenario: You bought an investment property in June 1995 for $200,000 with $8,000 in buying costs. You sell in 2026 for $900,000 with $25,000 in selling costs. No capital losses. No capital works claimed.

Discount method

Item	Amount
Capital proceeds	$875,000 ($900,000 − $25,000 selling)
Cost base	$208,000 ($200,000 + $8,000 buying)
Capital gain	$667,000
50% discount	−$333,500
Net capital gain	$333,500

Indexation method

CPI for Jun 1995 quarter = 119.0. CPI for Sep 1999 quarter = 128.5.

Item	Amount
Indexed cost base	$208,000 × (128.5 ÷ 119.0) = $224,605
Capital proceeds	$875,000
Indexed capital gain	$875,000 − $224,605 = $650,395
No discount applied	$0
Net capital gain	$650,395

Result

Method	Net capital gain	Better?
Discount	$333,500	Yes
Indexation	$650,395	No

In this example, the discount method gives a significantly lower taxable gain. This is the more common outcome for most assets, because CPI indexation only runs up to September 1999 while many assets have appreciated substantially since then.

When indexation wins: The indexation method can be better when the asset was acquired well before 1999 (maximising the CPI uplift) and the total gain is relatively small. The calculator compares both automatically.

SMSF discount (33.33%)

Self-managed super funds that are complying funds receive a one-third (33.33%) discount rather than the 50% individual discount. The same rules apply:

Asset must be held 12+ months
Losses are applied before the discount
The net capital gain is then taxed at the fund's 15% rate (in accumulation phase) or 0% (in pension phase)

Example — SMSF

Item	Amount
Capital gain	$90,000
33.33% discount	−$30,000
Net capital gain	$60,000
Tax at 15% (accumulation)	$9,000

Choosing the right method

Factor	Discount method likely better	Indexation method may be better
Acquisition date	After Sep 1999 (only option)	Well before Sep 1999
Size of gain	Large gains	Smaller gains relative to cost base
CPI movement	N/A	Large CPI increase from acquisition to Sep 1999
Entity type	Individuals (50%), SMSFs (33.33%)	Individuals only

For most people, the discount method will be the better choice. The calculator compares both and highlights the lower outcome.

Capital Gains Tax Calculator Australia — complete CGT overview
CGT Cost Base Explained — what's included and what reduces it
Capital Gains Tax on Property — property-specific CGT rules
Capital Gains Tax on Shares — shares, ETFs, managed funds
Capital Gains Tax on Crypto — ATO crypto rules

Important: This guide is general information only and does not constitute tax advice. The choice between methods depends on your specific circumstances. Consider consulting a registered tax agent.

CGT Discount & Indexation Methods