Whats the G.O. with C.G.T?

Capital Gains Tax (CGT) is the tax payable in Australia for profit made with investing our money into assets such as property and shares.

CGT was brought in by the Hawke/Keating government to share the revenue generated by assets acquired post the September ‘85 date. All assets you’ve acquired since tax on capital gains started (20 September 1985) are subject to CGT unless specifically excluded. Most personal assets are exempt from CGT, including your home, car and personal use assets such as furniture.

If you have both capital gains and capital losses, you also have to work out your net capital gain or net capital loss for the year. On the 21st of September 1999 the 50 percent discount method was introduced which allowed you to halve the capital gain, for assets held longer than 12 months.

There is only one way to work out your capital loss however there are various ways to calculate your capital gain. The simplest way to do so, by way of example, is to divide the amount of profit (which is the difference in price of when you acquired the asset to when you sold it) by 50% outlined below;

i.e.         

Original purchase price                            $300,000 -

Sold (after holding for greater than 12 months)  $500,000

Capital gain                                                       $200,000

Capital Gain less 50%                                       $100,000

Therefore, in this example, $100,000 is your capital gain which you will pay tax on at your Marginal Tax Rate (MTR). If the asset was held less than 12 months the CGT would’ve been twice as much.

As can be seen from the example above, planning in advance of disposing assets is a wise move. An adviser can work with you on such considerations as what financial year is best to sell a particular asset, reviewing strategies to reduce your MTR and sequencing of sales where multiple assets are to be liquidated.

Talking to an adviser can make a powerful difference to your future.

Anne Street Partners Financial Services Pty Ltd (ABN 25 107 671 563 AFSL 258853).

General Advice and Taxation Disclaimer: The information included in this article is general in nature only and does not constitute personal financial advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs. Importantly, you cannot rely on this article to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, you should seek advice from a registered tax agent or a registered tax (financial) adviser.