Capital Gains Tax (CGT) is the tax you pay on any capital gain you make, which 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.
In general you acquire property when you become its owner. This usually happens at the time the contract is entered into.
The most common way of acquiring property is by buying it. Although there are other ways of acquiring it, such as, inheriting it, receiving it as a gift, or winning it as a prize. The money you pay to acquire a property, or in some cases its market value, together with other related expenses becomes its cost base.
A capital gains tax (CGT) event happens when you dispose of property.
The most common way of disposing of property is by selling it. Although there are other ways, such as giving it away, or by it being compulsorily acquired – for example, to provide land for a proposed freeway.
At the time a CGT event happens, you may make a capital gain or a capital loss.
If you were to make a capital gain, that would be subject to capital gains tax. However, if instead you make a capital loss, it may be offset against capital gains you make on other assets – thereby reducing the overall amount of tax you must pay.
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 assets), less any relevant CGT discount or concessions. Any net capital gain you make for an income year must be included in your assessable income.
Significance of Contract Dates
• Properties you acquired before 20 September 1985 are generally exempt from Capital Gains Tax.
• The length of time you hold a property can affect the way you calculate your capital gain.
• The date of disposal determines in which income tax return you show any capital gain or capital loss you make.
Our dedicated team of Accountants, Lawyers and Financial Planners can assist you with queries relating to how Capital Gains Tax can affect buying or selling a property, as well as other legal and accounting matters. Complete and submit the Online Enquiry form or call us on 1300 QUINNS (1300 784 667) +61 2 9223 9166 to arrange an appointment.