When you’re selling assets such as investment properties, a tax that you will be subject to is known as the Capital Gains Tax, also referred to as CGT. If CGT is new to you, chances are that you have no idea what it is all about or what it even is. Fortunately for you, we’re here to solve that problem!
Today, let’s talk about CGT, sharing with you things you need to know about it:
What Is General Capital Gains Tax?
CGT is a tax that you will be subject to when you make a profit when you sell an asset such as property or stock. An asset is something with monetary value that can increase or decrease in value over time.
When you sell an asset, which is called a CGT event, you will be taxed on the gain that you will make.
Which Assets Are Subject to Capital Gains Tax?
CGT tax applies to the various assets that you sell or get rid of. This can include all sorts of things, such as your real estate, which includes rental properties, holiday houses, and vacant lands. Your home, however, is exempt from CGT unless you rent it out, use it for business purposes, or are found on land larger than two hectares.
Apart from properties, other things like cryptocurrency, personal use assets, collectables, intangible assets, foreign currency, and more are also subject to CGT. Keep in mind, however, that there are certain criteria that the assets must meet to be taxed.
What Are the Taxes Associated with Capital Gains Tax?
When it comes to the taxes associated with CGT, the first thing you will want to know is how much CGT you need to pay. Generally, you pay tax on an asset that you have a capital gain from. That said, the math behind CGT is simple. You need to calculate your net capital gain, which takes your total capital gains, minus any capital losses along with any discounts you are entitled to on your gains, and that would be the net capital gain.
For the discount itself, you typically can reduce the capital gain by half if the asset sold or disposed of is owned for at least twelve months and you are an Australian resident for tax purposes. Note that there will be exclusions from the CGT discount, and you can learn more by reaching out to a professional or checking out the Australian Taxation Office’s website.
Now that you have your net capital gain, you can now calculate your CGT. You can use an online calculator to help you with that, such as the one offered by the Australian Taxation Office (ATO).
Conclusion
As you can see, CGT is one of the taxes that you need to pay when you want to sell an asset. However, you will want to know more about CGT and how it applies to you and your finances. If you’re looking to sell your assets, whether it be property or anything else, always feel free to reach out to a professional for help. They can help you understand how CGT works further and what you can do to maximise your savings!
M1 Accounting is a CPA accounting practice on the Gold Coast, offering tax preparation and business advisory services to help individuals and businesses meet their tax-related needs. If you are looking for an accountant in Australia to help you with CGT and more, reach out to us today!
No responses yet