For Australian individual investors, brokerage reduces the cash return from buying and selling ASX shares, and eligible brokerage costs can also affect the capital gains tax calculation. Dividends and eligible franking credits have their own tax treatment. That means a share’s price movement alone does not show your result: you need to account for both transaction costs and your tax position.
How brokerage changes your return
Brokerage is a cash cost paid to buy or sell shares. Count it on both sides of a completed investment: purchase brokerage increases the amount you put in, while sale brokerage reduces the cash you receive. Any other applicable transaction costs should also be considered.
The Australian Taxation Office (ATO) illustrates the cost-base treatment in its Personal investors guide to capital gains tax 2025: Fred buys shares for $5,000, pays $50 brokerage on acquisition and $50 on disposal, and has a $5,100 cost base. Those amounts are an ATO worked example, not a current broker quote or a typical-fee benchmark.
For an investor, eligible incidental costs of acquiring or disposing of shares, including brokerage, may form part of the cost base. In broad terms, capital proceeds less the adjusted cost base determine whether a capital gain arises. Different purchase dates may mean you own separate parcels, so identify the shares sold and use the relevant parcel records rather than treating all holdings as one undifferentiated purchase.
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Separate the cash economics from the tax calculation. A useful framework is:
- Cash invested: purchase value plus purchase brokerage and any other applicable acquisition costs.
- Cash proceeds: sale value less sale brokerage and applicable disposal costs.
- Pre-tax economic result: sale proceeds plus dividends and other relevant distributions, less the original cash invested and any specified holding costs. Be explicit about whether you include reinvested dividends, inflation, foreign exchange or ongoing account fees.
- Taxable capital gain: broadly, capital proceeds less the relevant cost base, after required adjustments and parcel identification. Apply available capital losses and any eligible CGT method or discount in the required order.
- Dividend tax treatment: include assessable dividends and eligible franking credits as required. A franking credit is included in assessable income and also provides a corresponding tax offset when eligible.
- After-tax result: account for the tax attributable to the investment within the investor’s actual tax position for the relevant income year.
This framework is not a personal tax estimate. Tax cannot reliably be calculated by multiplying every part of a share return by one assumed rate: the components have different tax treatment, and an investor’s broader circumstances matter.
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How capital gains tax applies to ASX shares
The ATO describes capital gains tax (CGT) as part of income tax, not a separate tax. It applies to profits from disposing of assets, including shares. A gain can increase tax payable; a capital loss may generally be used against capital gains in the current or a future year, subject to the rules. See the ATO’s 2025 guide to shares and units for cost-base and disposal guidance.
The 12-month discount is not a 50% tax cut
An eligible individual may be able to reduce a discount capital gain by 50% if the asset has been held for at least 12 months. Eligibility and the calculation rules matter, including the treatment of capital losses. The discount reduces the eligible gain included in the net capital gain calculation; it does not halve the investor’s tax rate.
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The ATO’s 2022–23 capital gain or loss worksheet illustrates the order: a $5,000 gain less $3,500 in carried-forward capital losses leaves $1,500, and the 50% discount then produces a $750 net capital gain. This is an example from that income year, not a tax estimate for a current investor.
How dividends and franking credits affect tax
Dividends are generally included in assessable income. Where the investor is eligible, the franking credit is also included in assessable income and a matching tax offset applies. The credit is not simply extra cash received; it is a tax component associated with the dividend.
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Eligibility restrictions can apply, including holding-period and related-payment rules. The ATO’s 2022–23 dividend tax return instructions explain the general reporting mechanics. Check the instructions for the income year you are filing, since the cited instructions are for 2022–23. Gross dividends alone are not enough to determine an investor’s final tax payable.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Choose a broker by total cost and service
There is no established cheapest broker in the information cited here, and fees change. Compare costs against your own order sizes and trading frequency, using each provider’s current fee schedule. ASX distinguishes full-service brokers, which typically charge more for advice and other services, from non-advisory brokers that may suit investors confident in making their own decisions. See ASX guidance on buying and selling shares.
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- Check brokerage for your expected order value, including minimum charges or percentage-based pricing.
- Estimate annual costs using your likely number of purchases and sales, rather than comparing a single trade in isolation.
- Check for any account, inactivity, custody, foreign-exchange or other fees relevant to the service directly with the broker.
- Decide whether you want advice or plan to make your own investment decisions.
- Check what transaction and tax records the broker supplies; do not assume providers offer identical reporting.
Keep records for each parcel and dividend
Accurate calculations depend on records, including purchase and sale dates and values, brokerage, parcel details and dividend statements. Keep documents that support cost-base adjustments and note the relevant income year. A simple transaction ledger can help organise this information, but it is not an official ATO requirement and does not replace source documents or correct tax treatment.
Who this guidance applies to
This overview concerns Australian individual investors holding ASX shares as investments. Tax treatment can differ for share traders, companies, trusts, superannuation funds, non-residents, employee shares, foreign shares and corporate actions. Frequent trading by itself does not establish whether someone is an investor or trader; classification depends on the facts. For an actual return calculation, use the rules for the relevant income year and consider professional tax advice if your circumstances are complex.
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