Capital Gains Tax (CGT) is the tax you pay on any capital gain you make in the financial information that you include in your annual income tax return. There is no separate tax on capital gains, it is a component of your income tax. You are taxed on your net capital gain at your marginal tax rate.
How does CGT work?
Your net capital gain is the difference between your total capital gains for the year and your total capital losses (from your business and other personal assets), less any relevant CGT discount or concessions that you may be eligible for. Any net capital gain you make for an income year must be included in your assessable income.
There are certain things that you need to know when it comes to working out whether or not you need to pay CGT. This includes: If a CGT event has in fact taken place, when it occurred, if you’re eligible for exemptions and/or discounts, etc.
Besides the obvious CGT assets such as land and buildings, there are other CGT assets that are not so well known. These include things such as: options and goodwill. CGT assets can be either: Personal use assets, collectables or other assets.
There are certain rules that are especially for CGT assets which are jointly owned, and it is advised that you seek advice when it comes to more intricate CGT matters such as this.
Perhaps one the most common instances for incurring a capital gains tax liability is the disposal of an investment property. The Quinn Group have a lot of experience in dealing with tax issues surrounding investment properties. Find out more about tax and property investment. We regularly contribute to Your Investment Property magazine. You can read the collection of recently featured articles by visiting our Editorial Features page.
A CGT event is a transaction regarding a CGT asset or direct acquisition of capital that leads to either a loss or gain. The sort of CGT event that occurs is pivotal to the way in which you determine the capital gain/loss, and to what period you attribute it to.
CGT events are very common, and mainly involve discarding or disposing of an asset.
Some less common CGT events include a shareholder receiving a payment not in the form of a dividend, the loss or damage of an asset, you cease to be a resident of Australia, or you get rid of an asset that served a private function and was depreciating, etc.
It is very important to know that if you own assets overseas, they too are subject to CGT here in Australia.
Do you need to pay CGT?
To work out whether you have to pay tax on your capital gains, you need to know:
- whether a Capital Gains Tax event has happened
- the time of the Capital Gains Tax event
- how to calculate the capital gain/loss
- whether there is any exemption or rollover that allows you to reduce or disregard the capital gain/loss
- how to apply any capital losses
- whether the Capital Gains Tax discount applies, and
- whether you are entitled to any of the Capital Gains Tax concessions for small business.
If you are required to pay Capital Gains Tax, there are a range of various concessions that you may be eligible for in regards to your Capital Gains Tax liability.
The world of tax can be extremely complex and if obligations are not adhered to it can often become quite stressful, not to mention costly. The accountants, lawyers and tax agents at The Quinn Group are able to assist you with all tax and ATO related matters. For advice or more information contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.
For more detailed information on Capital Gains Tax, visit our dedicated website All Capital Gains Tax Solutions.