Understanding Capital Gains Tax
Capital Gains Tax (CGT) applies when you sell an asset for more than you paid for it. In Australia, CGT affects shares, investment properties, and other assets purchased after September 1985.
- CGT is not a separate tax but part of your income tax
- Only applies to assets acquired after 20 September 1985
- Your main residence is usually exempt from CGT
- Small business assets may qualify for concessions
CGT Discount and Rates
Australian residents can claim a 50% CGT discount if they hold an asset for more than 12 months before selling it.
- Individual taxpayers: 50% discount after 12 months
- Superannuation funds: 33.33% discount after 12 months
- Companies and trusts: No CGT discount available
- Foreign residents: No CGT discount from 8 May 2012
Calculating Your Capital Gain
To calculate your capital gain, subtract the cost base from the selling price. The cost base includes purchase price, stamp duty, legal fees, and improvement costs.
- Cost base = purchase price + acquisition costs + improvement costs
- Capital gain = selling price - cost base - selling costs
- Keep detailed records of all transactions and expenses
- Consider using indexation method for assets acquired before 1999
CGT Strategies and Planning
Strategic planning can help minimise your CGT liability while maximising your investment returns.
- Time asset sales across financial years to manage tax brackets
- Use capital losses to offset capital gains
- Consider spouse transfers to utilise lower tax brackets
- Explore small business CGT concessions if applicable
- Seek professional advice for complex situations