Capital Gains Tax Assistance
Let our expert consultants guide you through all your capital gains tax (CGT) matters with clarity and confidence.
What is Capital Gains Tax?
When you sell a capital asset—such as real estate or shares—you may realize either a capital gain or a capital loss. This difference is calculated between the price you paid for the asset and the amount you receive when you dispose of it. You are required to report these gains or losses in your income tax return and pay tax on any capital gains.
Despite being called capital gains tax, CGT is not a separate tax; rather, capital gains are included in your assessable income and taxed accordingly. Because tax is not automatically withheld on capital gains, it’s wise to estimate your potential tax liability and set aside funds to cover it.
If you incur a capital loss, you can’t offset it against your other income but can use it to reduce capital gains in the current or future years.
What Assets Are Subject to CGT?
Most assets acquired since 20 September 1985 are subject to CGT unless specifically exempted. Common exemptions include:
- Your main residence (with some exceptions)
- Personal use assets such as cars, furniture, and collectibles below certain value thresholds
- Depreciating assets used solely for business or taxable purposes (e.g., rental property fittings)
- Assets acquired before 20 September 1985 (pre-CGT assets), though some exceptions apply, especially for certain shares and trust interests
When Does a CGT Event Occur?
Typically, a capital gain or loss is realized at the time you enter into a contract to dispose of the asset—not when settlement occurs. For example, if you sign a contract to sell an investment property in June but settle in August, you must report the gain or loss in the tax year when the contract was signed.
CGT for Residents and Foreign Investors
Australian residents pay CGT on assets owned worldwide. Norfolk Island residents have specific rules applying to assets acquired from 23 October 2015. Foreign residents are subject to CGT only on taxable Australian property.
Other Important Exemptions
Capital gains or losses are generally exempt for:
- Cars and similar vehicles used for personal purposes
- Personal use items and collectibles below defined values
- Assets used exclusively to generate exempt or non-assessable income
- Certain compensations, damages, and insurance payouts
- Transfers related to superannuation interests in family law matters
- Certain financial arrangements and venture capital investments
- Specific testamentary gifts made through wills
Understanding CGT can be complex, but with the right advice, you can manage your tax obligations effectively and plan for the future. Contact us today for personalized assistance on your capital gains tax matters.