Capital Gains & Tax

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What is Capital Gains Tax

If you sell a capital asset, such as real estate or shares, you usually make a capital gain or a capital loss. This is the difference between what it cost you to acquire the asset and what you receive when you dispose of it.

You need to report capital gains and losses in your income tax return and pay tax on your capital gains. Although it's referred to as capital gains tax (CGT), this is part of your income tax, not a separate tax.

When you make a capital gain, it is added to your assessable income and may significantly increase the tax you need to pay. As tax is not withheld for capital gains, you may want to work out how much tax you will owe and set aside sufficient funds to cover the appropriate amount.

If you make a capital loss, you can't claim it against your other income, but you can use it to reduce a capital gain.

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Understanding Capital Gains & Tax

A capital gain or loss is the difference between what you paid for an asset and what you sold it for. This takes into account any incidental costs on the purchase and sale. So, if you sell an asset for more than you paid for it, that's a capital gain. And if you sell it for less, that is considered a capital loss.

Capital gains tax applies to capital gains made when you dispose of any asset, except for specific exemptions (the most common exemption is the family home).

Being organized is key when trying to calculate and pay capital gains tax quickly. And an excellent way to be organized is to keep up to date records by holding on to things like:

Initial sale contracts and other receipts for other expenses.
Interest paid on related borrowings.
Receipts for ongoing expenses.
Expense records.
Valuations.

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Exemptions to Capital Gains Tax

There are several instances when you should not pay CGT.

If you make a loss — you sold your property for less than you originally bought it — you do not have to pay CGT.

You are also not required to pay CGT if you sell your principal place of residence (PPOR).

Generally, you can claim that a property is your primary residence for the following reasons:

  • if you and your family live in it;
  • if you have personal belongings inside the house;
  • if it is the address your mail is delivered to;
  • and if your residence is listed on the electoral roll.

When your principal residence becomes a rental property, a six-year rule will apply — this means that if you dispose of your property within the six years, and you don't own another PPOR during this time, you would still be exempted from paying CGT.

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How We Can Help

Let us help you to minimize capital gains tax in Australia and obtain the highest number of deductions to help calculate your capital gains tax. Before selling any significant assets, we can help you plan and keep your taxes low. 

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Benefits of Working With Klear Picture

We offer tailored solutions for your wealth ambitions.

Klear Picture is not a traditional financial planning service.

We provide a team of experts and advisers with a broad range of expertise necessary to design your holistic plan.

Other advantages of this exciting partnership include:

  • Access to superior and current research and data that enables us to provide informed and immediate advice. They have the infrastructure to support analyses of market data from around the world sagely and quickly.
  • Importantly, their values and culture were required to match ours so that we were confident that you receive consistent, credible and consummate services and strategies.
  • Klear Picture is not aligned with any banks or Super institutions.
  • Klear Picture provides a flat fee for service as our advice is not commission driven.
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Contact us for accurate and current advice on your accounting and taxation requirements. We work for both you and your business.

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