Capital Gains Tax (CGT) applies to the capital gain made on disposal of any asset except where specific exemptions and concessions exist. Businesses may be eligible for generous CGT concessions if they meet certain conditions. CGT advice from Murray Nankivell could represent a significant saving to your business.
CGT can be very complicated and can impact your financial position – but with timely planning and clear advice we can help guide you to minimise any negative effect. Murray Nankivell can help by first understanding your objectives and goals and then work with you to find the best solution.
What is a capital gain or capital loss?
A capital gain / loss is the difference between what you paid for an asset and what you sold it for, taking into account incidental costs on purchase and sale. In broad terms, if you sell an asset for more than you paid it is a "capital gain"; if you sell it for less it is a "capital loss". This only applies to assets that are subject to CGT.
What is capital gains tax?
Generally, CGT is a tax you pay on your capital gain from a CGT asset acquired after 19 September 1985. It's not a separate tax and forms part of your taxable income. Not all assets are subject to CGT; for example it doesn't apply to your principal place of residence or your private car (daily driver).
Acquiring and owning CGT assets
When you acquire a CGT asset, you need to start keeping records immediately because you might have to pay tax on it in the future. Your records will help ensure you don't pay more tax than necessary. If you own the asset jointly, you'll need to establish each owner's share.
CGT exemptions, rollovers and concessions
A number of assets are exempt from CGT, including your home and car, and depreciating assets used solely for taxable purposes. Individuals and small businesses can generally discount a capital gain by 50% if they hold the asset for more than one year. In certain circumstances a capital gain on a CGT event can be deferred, or 'rolled over', until another CGT event happens. There are a number of other CGT concessions specifically for small business.
Working out your capital gain/loss
For most CGT events, you work out your capital gain or capital loss by subtracting your 'cost base' (what it cost you to get the asset) from your 'capital proceeds' (what you received when you disposed of it). The amount you declare on your income tax return is the total of your capital gains for the year, less any capital losses you incurred and any CGT discounts or concessions you're entitled to.
What assets attract capital gains tax?
Only assets which are "CGT assets" are subject to CGT. If the asset is not a CGT asset, it should not be affected by the event and no capital gain or capital loss should arise. A CGT asset is broadly defined under tax law and may include:
- Assets like land and buildings (for example investment properties) and shares
- Collectables costing less than $500 and acquired after 19 September 1985 like jewellery, antiques, stamps, artwork or that mint-condition train set your dad gave you.
Typically, assets for personal use like private cars, boats, furniture and day-to-day household items should not be subject to CGT.
How does CGT relate to deceased estates?
Special rules and concessions apply to houses acquired through a deceased estate. These rules apply regardless of whether the dwelling was acquired before 19 September 1985 by the deceased.
These rules are specific and it is recommended that you seek tax advice to determine whether your circumstances meet the special rules for deceased estates.
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