Capital Gains Tax

Published On - 18 August 2023

tfcadmin Finance, Financing, Lending, Property
capital gains tax

Capital Gains Tax

What is Capitals Gains Tax?

Capital Gains Tax (CGT) is tax that you are required to pay on any capital gain earned on the sale of an asset, such as a property, that you bought on or after 20 September 1985.

In other words, it’s the profit that you make when your sale price exceeds the original purchase price of the asset. If the asset (investment property) is sold for less than the purchase price, you would have made a capital loss.

While investment properties are subject to CGT your main place of residence may be exempt.

There is no set rate of CGT in Australia for individuals. Instead, you pay CGT at your marginal rate of tax if you need to pay it.

Here’s 5 ways you can minimise your Capital Gains Tax (CGT):

  1. Use the 12-month ownership discount. If you hold onto your asset for at least 12 months, you will automatically receive a 50% discount on any capital gains from the sale if you are an individual or trust.
  1. Offsetting your capital gain with capital losses. Capital gains from current or prior years can be used to reduce a capital gain and therefore the amount of CGT you need to pay.
  1. Revaluing your primary residential property before you rent it out. For rental homes, the cost base is calculated using the market value of the property at the time it is first rented, rather than the price it was purchased for. If your property has appreciated since you first purchased it, you will only pay capital gains tax on the value earned over this amount.
  1. Taking advantage of small business CGT concessions. If you run a small business and you sell a business asset, there are a range of small business CGT exemptions and concessions available if you meet the eligibility criteria.
  1. Talking to a tax professional. Your accountant may be able to advise on additional strategies such as taking advantage of super contributions and different investment structures.

Navigating CGT can be complex, and tax obligations may vary based on individual circumstances. It is advisable to consult a qualified tax professional or seek advice from the Australian Taxation Office (ATO) for personalized guidance.

To find out more, speak with the experts at Trusted Financial Choice.