Capital Gains

Capital Gains Tax, commonly referred to as CGT, is a tax imposed on the profit earned from the sale of non-inventory assets such as stocks, bonds, precious metals, real estate, and collectible items. Effective management of CGT is crucial, as it directly impacts the net returns from these investments.

Quick CGT Tips

Things to remember.
$500 Threshold
If you have sold any such assets (and the value was over $500), you will need to report this in your Income Tax Return. The Australian Taxation Office counts Capital Gains or Losses as income.
Keep Documents
As per normal tax-deductible purchases, keeping all relevant documents relating to the purchase and sale of your asset is necessary. The purchase price and associated expenses will be your ‘cost base’, which will assist in reducing overall Capital Gain (your profit).
Discounts & Exemptions
Discounts may be available if you owned the asset for at least 12 months - saving 50% in payable tax. Also, some assets are exempt from CGT, while others are excluded from the GCT discount.

Methods to Calculate Capital Gains

A. Indexation - Calculation Method

  • You may use this method for assets acquired before 11.45am AEST on 21 September 1999.
  • The indexation method allows you to increase the Cost Base of the Asset by applying an indexation factor based on CPI up to September 1999
  • Then subtract this amount from your proceeds.
  • This method may be used if it is a better result than the Discount Method.

B. Discount - Calculation Method

  • Allows you to discount your capital gain
  • You can choose this method for an asset owned for 12 months or more if it produces a better result than the indexation method.
  • Subtract the cost base from the capital proceeds, deduct any capital losses, then reduce by 50%

C. Other Method

  • When you have bought and sold an asset within 12 months
  • You are not eligible to claim the Discount.
  • Subtract the Cost Base from the proceeds.

Capital Gains Tax (CGT) Example

Jill works as a Designer her taxable income is $65, 000. Jill sold shares she held for over 12 months.

The original purchase price of these shares was $2,500. The brokerage on Purchase was $30 and the Brokerage on the Sale of the Shares was $30.

Jill’s Shares were sold for $5000.

Jill can reduce the proceeds by the original purchase price and the cost of brokerage.

Capital Gain is $5,000 - $2,560 = $2,440

Jill will be eligible to receive a discount of 50% therefore her Assessable Capital Gain will be:

$2,440 x 50% = $1,220 this would add to Jill’s Assessable income.

$65, 000 + $1,220 = $66,220 Adjustable Taxable income.

Frequently Asked Questions

What types of assets are subject to Capital Gains Tax?
Capital Gains Tax typically applies to assets such as real estate (excluding your primary residence), shares, managed funds, business assets, collectibles, and personal use assets acquired after 19 September 1985. Certain exemptions and concessions may apply.
Are there any exemptions or concessions available for Capital Gains Tax?
Yes, there are exemptions and concessions available under Australian tax law, such as the main residence exemption for your primary residence, small business concessions, and exemptions for certain collectibles or personal use assets under a certain threshold.
What is Capital Gains Tax (CGT), and when does it apply?
CGT is a tax applied to the capital gain made on the disposal of a capital asset, such as real estate or shares, that has increased in value since its acquisition. It applies when you sell or dispose of an asset and realize a capital gain.
How can ITP Queensland assist with Capital Gains Tax matters?
ITP Queensland offers expert assistance in understanding Capital Gains Tax implications, calculating capital gains or losses accurately, applying relevant exemptions and concessions, and ensuring compliance with ATO reporting requirements. Our professionals can help optimise your tax outcomes and minimise liabilities associated with capital gains.
When do I need to report Capital Gains Tax to the Australian Taxation Office (ATO)?
You generally need to report capital gains and losses in your income tax return for the relevant financial year in which the disposal occurred. This includes assets sold, gifted, or transferred, even if no money was received.