How retirees are taxed on capital gains in Australia (2026)

Retirement changes almost nothing about how capital gains tax (CGT) works technically — but it changes a lot about how much you actually pay. Lower assessable income, the CGT discount, superannuation contribution strategies and the pension phase of an SMSF can combine to reduce CGT to near zero on assets that would attract 47% tax during your working years. Here is how the rules actually apply for Australian retirees in 2026.

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How CGT works in Australia (the basics)

A capital gain is the profit you make when you sell an asset for more than its cost base. In Australia, CGT is not a separate tax — the net gain is added to your assessable income for the year and taxed at your marginal rate. Two features soften that:

• The 50% CGT discount for individuals who have held the asset for at least 12 months.
• Capital losses that can be carried forward indefinitely to offset future gains.

For a retiree with little or no wage income, the effect is powerful. A retired individual with $30,000 of other taxable income who sells shares held more than 12 months for a $60,000 gain is taxed on only $30,000 (after the 50% discount). Added to their $30,000 income, they are still in the 30% bracket for the top slice — a tax bill of roughly $9,000 on a $60,000 gain, or an effective rate of 15%.

Main residence exemption

The family home is generally fully exempt from CGT under section 118-110 of the Income Tax Assessment Act 1997, provided it has been your main residence for the entire period of ownership. Two common retiree scenarios where the exemption tightens:

• You rented out part of the home (e.g. an ensuite via a boarder) — partial CGT can apply to the rented portion.
• You moved out and rented the whole property — the six-year absence rule preserves the exemption for up to six years of absence, but only if you don't nominate another property as your main residence at the same time.

Investment property CGT for retirees

An investment property sold in retirement is taxed the same as any other asset — assessable income minus cost base, then reduced by the 50% discount if held over 12 months, then added to your taxable income. Two retirement-specific levers can reduce the tax:

• Timing the sale — a year when other income is low can save tens of thousands.
• Concessional super contributions — a personal deductible super contribution up to the $30,000 concessional cap (plus any carry-forward unused cap if your total super balance is under $500,000) reduces taxable income dollar-for-dollar. It is only taxed at 15% inside super instead of your marginal rate.

Shares and managed funds

Shares and managed fund units follow the same CGT rules as property — held over 12 months for the 50% discount, gain added to assessable income. Retirees with an income under the tax-free threshold ($18,200 in 2025–26) can realise up to $36,400 of pre-discount capital gains in a year and pay $0 tax, because the discounted $18,200 gain sits inside the tax-free threshold. This is a well-known strategy for progressively rebalancing a portfolio in early retirement.

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The SMSF pension phase advantage

The biggest CGT lever for Australian retirees is the pension phase of super. Once you commence an account-based pension inside your super fund — whether an SMSF or an APRA fund — the assets supporting that pension move into 'retirement phase' and their earnings, including realised capital gains, are taxed at 0%.

For a self-managed super fund, this means:

• Selling shares or a managed fund inside a pension-phase SMSF triggers zero CGT — the gain is entirely tax-free.
• Selling a property held inside an SMSF that is in pension phase can also be entirely tax-free — a saving of tens or hundreds of thousands of dollars compared with holding the same property personally.
• There is a $1.9 million per-person Transfer Balance Cap on how much you can move into pension phase. Amounts above the cap stay in accumulation and are taxed at 15% on earnings.

For a couple, the effective tax-free investment cap in pension phase is $3.8 million. Combined with the CGT-free treatment of asset sales inside pension phase, this is the single largest reason high-balance Australians move to an SMSF in the decade before and after retirement.

The transitional CGT relief on segregating pension assets

SMSFs with mixed accumulation and pension balances can use segregation or the actuarial proportion method to allocate earnings between the two tax environments. The rules are technical and getting them right matters — a mistake can convert a tax-free gain into a taxable one. Every easySMSF administration includes an annual review of pension segregation and the actuarial certificate where required.

Practical CGT strategies for retirees

• Realise gains in low-income years, especially before commencing an Age Pension.
• Use a personal deductible super contribution in the same financial year to offset the assessable portion of the gain.
• Where possible, hold long-term growth assets inside super and short-term or income-producing assets outside — the pension-phase 0% rate is the highest-value tax setting Australia offers.
• Consider a downsizer contribution ($300,000 per person from the sale of your home if you are 55+) to boost your super without touching your contribution caps.
• Keep detailed cost base records — legal fees, capital improvements and holding costs on non-income-producing assets all reduce your assessable gain.

General information only — not personal tax or financial advice. CGT outcomes depend on your individual circumstances. Speak to a registered tax agent or financial adviser before acting.

Sources: Australian Taxation Office — Capital gains tax and Working out your capital gain (ato.gov.au); Income Tax Assessment Act 1997 sections 102-5, 115-25 and 118-110; ATO — Tax on super benefits and Transfer balance cap; Superannuation Industry (Supervision) Act 1993.