Australian shares are taxed in two ways: capital gains when you sell, and income when dividends land. Get those two right, and the records behind them, and tax time is genuinely straightforward. Here's how each one works and how to calculate what you owe.

The two ways your shares are taxed

Capital Gains Tax (CGT) applies when you dispose of shares: selling them, but also gifting them or transferring ownership. Your capital gain is the difference between what you sold for (capital proceeds) and what you paid, including brokerage (your cost base).

Income tax applies to dividends. They're assessable income in the year they're paid to you, whether you took them as cash or reinvested them.

Simply holding shares that have gone up in value isn't a taxable event. Tax happens when you dispose, or when you're paid.

Calculating your capital gain

Capital Gain = Capital Proceeds - Cost Base

If you've held the shares for at least 12 months before selling, you may qualify for the 50% CGT discount, which halves the taxable gain. Capital losses offset gains, and unused losses carry forward to future years.

The tricky part in practice isn't the formula, it's the parcels. If you bought the same stock at different times and prices, each parcel has its own cost base and acquisition date, and which parcel you sell determines your gain and whether the discount applies. That's where a year of trades gets messy fast.

(Heads up: the Federal Budget has proposed replacing the 50% discount with cost base indexation from 1 July 2027. It's not law yet, and FY25-26 is unaffected, but if you want the detail we've broken it down in our CGT changes guide.)

Dividends and franking credits

Dividends are income, but Australian dividends usually come with franking credits attached, your share of the company tax already paid. You "gross up" your dividend by the franking credit, include the total as income, then claim the credit back as an offset. For many investors the credit covers some or all of the tax on the dividend, and low-rate taxpayers can get excess credits refunded.

Your dividend statements show the franked amount and the credit. The ATO usually pre-fills these, but pre-fill misses things, especially early in tax season, and it won't calculate your CGT parcels for you.

The DRP trap

Dividend Reinvestment Plans catch people out twice:

1. The dividend is still taxable. Reinvesting doesn't defer the income, you're taxed as if you received the cash.
2. Every reinvestment creates a new parcel with its own cost base and acquisition date. Sell those shares years later and you'll need every DRP record to calculate the gain correctly.

If you've been in a DRP for years, this is usually the single biggest record-keeping headache at tax time.

What to do at tax time

1. Gather every disposal for the year (1 July 2025 to 30 June 2026), including transfers and gifts
2. Match each sale against its parcel cost base, brokerage included
3. Apply losses, then the 50% discount on eligible gains
4. Add dividends, grossed up with franking credits
5. Lodge by 31 October 2026 if you're doing it yourself through myTax, or later through a registered tax agent (get on their books before 31 October)

Or let the software do the parcels

Summ pulls your broker history, dividend records and DRP parcels together, matches disposals to cost bases, applies the discount where it's earned, and produces an ATO-ready report you can lodge from or hand to your accountant. And if you hold crypto too, it all lands in the same report, one consolidated view instead of two systems.

Track your stocks and crypto in one place

This article is general information, not tax advice. CARF implementation details depend on final legislation. For your specific situation, speak to a registered tax agent.