If you are reading this, it’s probably because you may not be fully understanding capital gains tax. Not to worry! Hopefully I can help solve any confusion surrounding CGT for you today!
Understanding Capital Gains Tax: What is a Capital Gain?
To cut it right down to the basics, a capital gain is measured by counting the difference between the purchase of an asset, and its sale or disposal. If you have made a Capital Gain, you will pay tax on this. The Capital Gains Tax is part of your income tax and is not a separate tax that you have to pay, despite the fact that it is referred to as Capital Gains Tax.
What if I have a Capital Loss?
It happens from time to time where an individual or business purchases an asset and suffers a capital loss; so what happens come tax time? The first thing you won’t be able to do is claiming it against income, however, you will be able to use it to reduce a capital gain on another asset from the same income year.
If you find that your capital losses are greater than your capital gain, you will generally be able to carry over your capital loss into following years to claim against future capital gains.
What assets are subject to CGT?
All assets you have acquired beyond 20 September 1985 are subject to CGT unless specified otherwise. Some personal assets are exempt from capital gains tax like your main residence (the house which you occupy a majority of the time), your car, or personal use assets such as furniture.
CGT also does not apply to depreciating assets used solely for tax purposes such as business equipment.
Does CGT apply to assets purchased and sold overseas?
So long as you are an Australian Resident, CGT will apply to all assets you have anywhere in the world. Foreign residents will also trigger a CGT event if an asset that they attain is categorised as “taxable Australian property”.
© Fitzpatrick Group 2017
Pauline Campbell – Senior Accountant
A valued member of Fitzpatrick Group since 2000, Pauline has a Bachelor of Business, majoring in Accounting . She specialises in business and company tax returns, and excels at preparing and lodging BAS statements for her clients.