Capital Gains Tax
If you sell a capital asset – such as real estate, shares or investments – you tend to sell it for more than it cost (if you’re lucky) or less than it cost (if you aren’t). This difference between the price you paid for it and the price you sold it for is a capital gain or capital loss.
Capital gains tax is levied on this capital gain (or loss) for all capital assets bought and sold. If you’re not currently keeping accurate records for the purpose of CGT, you may end up paying more capital gains tax than otherwise required, or you may be in breach of the law if you fail to pay it.
Wealthvisory can help with:
- Which assets you need to pay capital gains tax on
- Proper record keeping for capital gains tax
- Capital gains tax exemptions
- Calculating capital gains tax
- Lodging and paying capital gains tax
- Business capital gains tax
- Capital gains tax concessions
- Capital gains tax rollover
If you need help with capital gains tax in Mandurah, make an appointment to talk with one of our friendly accountants.
Why Do I Need To Consider Capital Gains Tax?
Many people don’t realise you need to pay attention to capital gains tax when buying an asset and not just when you’re selling it. You need clear documentation on when you acquired the asset and any significant events during ownership of the asset (eg. damage affecting the asset’s value or changes in joint ownership).
Even if you don’t plan to sell an asset, it’s important to consider capital gains tax implications when it comes to your beneficiaries – so even if you don’t plan on parting with an asset within your lifetime, keeping records for capital gain tax can make things smoother for family members inheriting those assets.
The reality is that many people currently own CGT assets and aren’t keeping proper records. If you’re uncertain whether you need to pay capital gains tax on an asset, or what documentation you need for capital gains tax, WealthVisory is your local capital gains tax expert.
How Is Capital Gains Tax Reported And Paid?
Capital gains tax forms part of your annual income tax return – in fact, the ‘capital gain’ from the sale of assets is considered assessable income. Unlike employment income, tax isn’t withheld from capital gains during the course of the year, meaning capital gains tax can significantly increase the level of tax you need to pay.
If you’re not aware of capital gains tax in advance, it can be a nasty surprise come tax time and can make a big difference to your tax position.
Whether you make a capital gain or a capital loss, both need to be reported on your income tax return. 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 (unless that capital loss is exempt).
When Do I Pay Capital Gains Tax?
You’ll need to consider the capital gains tax implications when selling any capital asset, like property or shares: if you make a profit on the sale, you may need to pay CGT. Both individuals and businesses need to report capital gains and losses on their annual tax return.
Capital gains from the sale of an asset form part of your taxable income, so the tax on any profit made is payable as part of your yearly tax assessment. The ‘CGT event’ occurs when the asset is sold or disposed of, but capital gains tax is paid as part of your annual income tax.
To look at it simply, you will need to pay any capital gains tax at the end of the financial year in which you sell your asset. The rate of capital gains tax will be calculated in line with your income bracket. Capital losses from the current or previous years can be used to offset capital gains for tax purposes.
We understand that capital gains tax can be a complex topic to navigate. At WealthVisory, our expert accounting team can make CGT easy for you. We can let you know in advance if you’ll need to pay capital gains tax on an asset sale, and how much you’ll need to pay.
When completing your annual tax return, we’ll ensure capital gains and losses are accounted for, and you’re getting any relevant CGT exemptions or discounts.
Which Assets Do I Need To Pay Capital Gains Tax On?
Capital gains tax applies to most assets, with the exception of certain personal assets (eg. your home, vehicle, and anything else for personal use up to a certain value).
Capital assets include:
- property and real estate
- shares, units and other investments
- leases or licences, contractual rights,
- cryptocurrency and foreign currency
- collectables and personal use assets above a certain value
Depreciating assets exclusively for taxable use also aren’t subject to capital gains tax.
If you happened to purchase the asset before capital gains tax was introduced, you won’t need to pay CGT – but anything you’ve acquired since 20 September 1985 is subject to capital gains tax.
Capital gains tax on collectables is also approached somewhat differently to other capital assets – if you’re looking at buying and selling an asset considered a collectable, it’s a great idea to speak to a tax accountant first to find out how it may affect your tax return.
The details for capital gains tax exemptions are quite complex and there are many kinds of assets that may or may not be considered capital assets. Therefore, we highly recommend seeking professional advice on capital gains tax to ensure you’re meeting legal requirements and not paying more tax than necessary.
Uncertain if you need to pay capital gains tax on your assets? Talk to one of our experienced capital gains accountants to find out.
Small Business Capital Gains Tax Concessions
Like many other initiatives aimed to help small businesses in Australia, there are capital gains tax exemptions for small business entities.
The ATO allows qualifying small businesses to disregard or defer capital gains tax under a number of circumstances, including upon retirement of the business owner, if the capital asset is considered an active asset and if an active asset is being replaced.
The ins and outs of these requirements are quite complex, so it’s always best to get capital gains tax advice to understand exactly which CGT concessions and rollovers your business may be eligible for.
If you need capital gains tax advice for business, contact WealthVisory to learn more about how we can help.
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To find out more about the services that we offer at WealthVisory, book an appointment online with us today.