{"id":7654,"date":"2022-10-04T00:03:51","date_gmt":"2022-10-03T13:33:51","guid":{"rendered":"https:\/\/adelaideprivatewealth.com.au\/understanding-capital-gains-tax\/"},"modified":"2022-10-04T00:03:51","modified_gmt":"2022-10-03T13:33:51","slug":"understanding-capital-gains-tax","status":"publish","type":"post","link":"https:\/\/adelaideprivatewealth.com.au\/understanding-capital-gains-tax\/","title":{"rendered":"Understanding capital gains tax"},"content":{"rendered":"<div>\n<p>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\u2019s a capital gain. And if you sell it for less, that is considered a capital loss.<\/p>\n<p>Capital gains tax applies to capital gains made when you dispose of any asset, except for specific exemptions (the most common exemption being the family home).<\/p>\n<p>Being organised is key when trying to quickly calculate and pay capital gains tax. And a good way to be organised is to keep up to date records by holding on to things like:\u00a0<\/p>\n<ul>\n<li>\n<p>initial sale contracts and other receipts for other expenses<\/p>\n<\/li>\n<li>\n<p>interest paid on related borrowings<\/p>\n<\/li>\n<li>\n<p>receipts for ongoing expenses<\/p>\n<\/li>\n<li>\n<p>expense records<\/p>\n<\/li>\n<li>\n<p>valuations.<\/p>\n<\/li>\n<\/ul>\n<h3>Deciding how to calculate capital gains tax<\/h3>\n<p>There are different ways to calculate your capital gains tax.<\/p>\n<p><strong>Capital gains tax discount<\/strong><\/p>\n<p>If you sell or dispose of your capital gains tax assets in less than 12 months you\u2019ll pay the full capital gain. But, you (as an individual) could get a 50% discount on your capital gain (after applying capital losses) for any capital gains tax asset held for over 12 months before you sell it.<\/p>\n<p><strong>Indexation<\/strong><\/p>\n<p>You can choose indexation if you acquired your assets before 21 September 1999, and have held it for at least 12 months. This is an alternative option to the discount method. The indexation method applies a multiplier to account for inflation on the cost base of your asset (up to September 1999).<\/p>\n<p>You can choose the indexation method if you\u2019ve carried forward any capital losses for assets held before 1999.<\/p>\n<p><strong>Capital loss<\/strong><\/p>\n<p>If you\u2019ve made a capital loss, you can deduct this from your capital gains (that you\u2019ve made from other sources) to reduce the amount of tax. If you don\u2019t have other capital gains (during that income year) you can carry over any capital losses to other income years\u2014something handy for another time.<\/p>\n<h3>Paying capital gains tax<\/h3>\n<p><strong>When to pay<\/strong><\/p>\n<p>Although it sounds like it, capital gains tax isn\u2019t a separate tax. Your net capital gains form part of your assessable income in whatever year your capital gains tax happened.<\/p>\n<p>Capital gains tax is payable as part of your income tax assessment for the relevant income year.<\/p>\n<p><strong>When not to pay<\/strong><\/p>\n<p>If you make a net capital loss in an income year, you shouldn\u2019t pay capital gains tax. But the net capital loss is unable to offset tax on any other income, and can only be \u2018carried forward\u2019 to offset capital gains in future income years.<\/p>\n<p>It\u2019s worth noting, some assets and events are exempt from capital gains tax. These include selling your principal home or personal car, or selling an asset acquired before capital gains tax was introduced on 20 September 1985.<\/p>\n<p>Have a read of the\u00a0<a href=\"https:\/\/www.ato.gov.au\/General\/Capital-gains-tax\/CGT-assets-and-exemptions#Exemptions1\" target=\"_blank\" rel=\"noopener\">ATO\u2019s full list of capital gains tax exemptions<\/a>.<\/p>\n<p><strong>Working out your capital gain (or loss)<\/strong><\/p>\n<p>To quickly figure out how much capital gains tax you\u2019ll pay \u2013 when selling your asset, take the selling price and subtract its original cost and associated expenses (like legal fees, stamp duty, etc.). The remaining amount is your capital gain (or loss).<\/p>\n<p>If you\u2019ve made a capital gain and you\u2019ve held an asset for greater than 12 months (assuming you don\u2019t have other capital losses), you can apply the 50% discount to work out your net capital gain (unless the indexation method applies).<\/p>\n<p>Companies and individuals pay different rates of capital gains tax. If you\u2019re a company, you\u2019re not entitled to any capital gains tax discount and you\u2019ll pay 30% tax on any net capital gains. If you\u2019re an individual, the rate paid is the same as your income tax rate for that year. For SMSF, the tax rate is 15% and the discount is 33.3% (rather than 50% for individuals).<\/p>\n<p>Have confidence in your future with help from us. Give us a call on [phone] today.<\/p>\n<p><span style=\"font-size: 10px\">Source: <a href=\"https:\/\/www.nab.com.au\/personal\/life-moments\/manage-money\/money-basics\/capital-gains-tax\" target=\"_blank\" rel=\"noopener\">NAB<\/a><\/span><\/p>\n<p>Reproduced with permission of National Australia Bank (\u2018NAB\u2019). This article was originally published at\u00a0https:\/\/www.nab.com.au\/personal\/life-moments\/manage-money\/money-basics\/capital-gains-tax<\/p>\n<p>National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.<\/p>\n<p>\u00a9 2022 National Australia Bank Limited (\u201cNAB\u201d). All rights reserved.<\/p>\n<p>Important:<br \/>Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents\/information contained within the linked site(s) accessible from this page.<\/p>\n<p>The post <a rel=\"nofollow\" href=\"https:\/\/mlcsocialfeed.p2.clientcommunity.com.au\/latest-articles\/understanding-capital-gains-tax\">Understanding capital gains tax<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/mlcsocialfeed.p2.clientcommunity.com.au\/\">MLC Contemporary<\/a>.<\/p>\n<\/div>\n<p class=\"wpematico_credit\"><small>Powered by <a href=\"http:\/\/www.wpematico.com\" target=\"_blank\" rel=\"noopener\">WPeMatico<\/a><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A capital gain or loss is the difference between what you paid for an asset and what you sold it&#8230;<\/p>\n","protected":false},"author":4,"featured_media":7686,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[15],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.8 - 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