Capital Gains Tax Australia
The sale of property, shares or a business represents a significant moment in time. Often the gain that is now realized has been accumulated over many years – and the tax attached to that transaction can be very significant.
Capital gains tax advice is incredibly important – not only because of the size potential tax liability but also because of the exciting range of capital gains tax concessions available to businesses and to families. And the law surrounding the capital gains tax concessions and rollovers is also one of the most complicated areas of tax law in Australia.
When we help families in business structure their business or investment affairs’ we always consider the long-term capital gains tax outcomes. In particular, the application of different CGT strategies for small business CGT concessions can vary depending on how it best suits a family, including the 15-year concession, small business reduction, CGT retirement concession, or replacement asset concession. And the main residence exemption on the sale of the family home (especially for mobile families) is always top of mind.
And if you are looking at an employee share scheme, corporate reconstruction or divestment of a business unit you can be sure that capital gains tax, and capital gains tax concessions, will apply to that transaction. And getting smart advice can help take your business to the next level.
We often use capital gains tax calculators to give a practical overview and understanding of the tax law advice on capital gains tax rollovers and the potential application of the small business CGT relief provisions. And we can actively work with how capital gains tax concessions can work tax effectively with contributions to superannuation funds (or an SMSF where relevant). So CGT advice coupled with a CGT calculation can distil the complexity of the transaction down to a single outcome and compare that to a position where no advice was produced.
For families moving to Australia the capital gains tax law on changing tax residency is a unique moment in time. And as capital gains tax can apply to an Australian tax resident on worldwide tax assets and only applies to a non-resident dealing with an Australian CGT asset – getting the VGT point in time when your tax residency changes in critical. So, a clear understanding of some families as to whether Australian capital gains tax is relevant as a tax position is a more important step than considering tax rollovers or tax relief.
In some instances, family assets are held for a long time, so the focus is to correctly record an asset’s purchase price (or CGT cost base) for future reference for estate and succession planning – especially for assets like holiday homes and vacant land. And this can be done by a CGT asset register or through clear ongoing financial reports and records.
If you are looking for capital gains tax advice, you should engage Westcourt because:
- We have proven tax leadership and knowledge with capital gains tax.
- Business Fitness powers our practice with many CGT templates and CGT calculators (available free to our clients) to help you understand how CGT Works.
- Our sole focus on families in business gives us an insight into how CGT works for families in business rather than diluting our focus on CGT events that will not affect privately-held businesses.
- Our leading-edge knowledge of cloud accounting software allows easier recording of CGT cost base amounts and keeping supporting documents.
- We can give a single tax advice piece for international CGT assets as we are the Western Australian representative of the GGI Global Alliance Network.
- We have stable partners and senior managers so that you can maintain and manage a long-term tax strategy for your CGT assets.
Frequently Asked Questions
The rate of Capital Gains Tax (CGT) in Australia depends on your taxable income, including your capital gains. Capital gains are taxed as part of your taxable income, and the tax rate you pay will depend on the total amount of your taxable income, including your capital gains.
For individuals, the CGT rate is as follows:
Taxable income up to $18,200: Tax-free
Taxable income from $18,201 to $37,000: 19 cents for each $1 over $18,200
Taxable income from $37,001 to $90,000: $3,572 plus 32.5 cents for each $1 over $37,000
Taxable income from $90,001 to $180,000: $20,797 plus 37 cents for each $1 over $90,000
Taxable income over $180,000: $54,097 plus 45 cents for each $1 over $180,000
For companies, the CGT rate is either 25% or 30%. Superannuation funds can have a capital gains tax rate ranging from 0% to 15%.
It’s important to note that the CGT rate is subject to change and it has a range of exemptions and rollovers. So it’s a good idea to keep up-to-date with the latest information and seek advice from a tax professional like Westcourt if you need help with your CGT obligations.
No, you do not have to pay Capital Gains Tax (CGT) immediately when you make a capital gain. In Australia, CGT is usually payable when you dispose of an asset, such as when you sell property, shares, or another investment.
When you make a capital gain, you must include the gain in your taxable income for the financial year in which the disposal occurs. You then calculate the CGT by subtracting the cost base (what it cost you to acquire the asset) from the capital proceeds (what you received when you disposed of the asset). The lodgement of the return happens after the financial year end the gain occurred.
The amount of CGT you pay will depend on your taxable income, including your capital gains, and the tax rate that applies to your taxable income.
For individuals, the CGT rate is as follows:
Taxable income up to $18,200: Tax-free
Taxable income from $18,201 to $37,000: 19 cents for each $1 over $18,200
Taxable income from $37,001 to $90,000: $3,572 plus 32.5 cents for each $1 over $37,000
Taxable income from $90,001 to $180,000: $20,797 plus 37 cents for each $1 over $90,000
Taxable income over $180,000: $54,097 plus 45 cents for each $1 over $180,000
It’s important to note that there are various rules and exemptions that may apply to CGT as many types of capital gains are exempt from tax or eligible for a tax rollover. So it’s a good idea to seek advice from a tax professional like Westcourt if you need help with your CGT obligations.
In Australia, there are several capital gains that are exempt from Capital Gains Tax (CGT). Some of the most common exemptions include:
Your main residence: If you use your home as your main place of residence, the capital gain you make when you sell it may be exempt from CGT.
Personal use assets: If you sell a personal use asset, such as a car or a piece of jewelry, the capital gain you make may be exempt from CGT if the asset was used predominantly for personal use and was not used to produce income.
Small business concessions: If you are a small business owner, you may be eligible for various small business concessions that can reduce or exempt the CGT you pay when you sell your business assets.
Superannuation: Capital gains made on assets held in a complying superannuation fund or a retirement savings account are generally exempt from CGT.
There are also many other exemptions on capital gains. And these exemptions and concessions are subject to specific rules and conditions, so it’s a good idea to seek advice from a tax professional like Westcourt if you need help with your CGT obligations.
