{"id":8021,"date":"2023-06-05T12:03:34","date_gmt":"2023-06-05T02:33:34","guid":{"rendered":"https:\/\/adelaideprivatewealth.com.au\/what-is-capital-gains-tax\/"},"modified":"2023-06-05T12:03:34","modified_gmt":"2023-06-05T02:33:34","slug":"what-is-capital-gains-tax","status":"publish","type":"post","link":"https:\/\/adelaideprivatewealth.com.au\/what-is-capital-gains-tax\/","title":{"rendered":"What is capital gains tax?"},"content":{"rendered":"<div>\n<p>Capital gains tax (CGT) is a term you\u2019ll often hear as tax time draws near. When you sell an asset, it can be all too easy to forget about the tax implications related to your sale.<\/p>\n<p>However, selling assets, like shares and investment properties, can involve capital gains tax. Here\u2019s what you should know.<\/p>\n<p><img decoding=\"async\" loading=\"lazy\" alt=\"\" height=\"300\" src=\"https:\/\/mlcsocialfeed.p2.clientcommunity.com.au\/wp-content\/uploads\/2023\/06\/What_is_capital_gains_tax.png\" width=\"570\"><\/p>\n<p><strong>Key takeaways<\/strong><\/p>\n<ul>\n<li>\n<p>Capital gains tax is the tax you pay on profits from selling assets, such as property.<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li>\n<p>Capital gains taxes are due only after an investment is sold.<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li>\n<p>You report capital gains and capital losses in your income tax return and pay tax on your capital gains. Although it is referred to as \u2018capital gains tax\u2019 it is part of your income tax. It is not a separate tax.<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li>\n<p>If you have a capital gain, it will increase the tax you need to pay.<\/p>\n<\/li>\n<\/ul>\n<p>Basically, if you buy shares, property or other assets for one price and sell them for another price, the difference between the amounts is your capital gain or capital loss. If you receive more for your assets than you paid for them, you\u2019ll have made a capital gain and you may need to pay capital gains tax on it. It is owed for the tax year during which the investment is sold.<\/p>\n<h3>How much capital gains tax will you pay?<\/h3>\n<p>The amount of capital gains tax you\u2019ll pay depends on factors including how long you\u2019ve owned the asset, what your marginal tax rate is, and whether you\u2019ve also made any capital losses. Your marginal tax rate is important because your capital gain will be added to your assessable income in your tax return for that financial year.<\/p>\n<p>There is a capital gains tax discount of 50% for Australian individuals who own an asset for 12 months or more. This means you pay tax on only half the net capital gain on that asset.<\/p>\n<p>If you own the investment for one year or less, short-term capital gains tax applies. The short-term rate is determined by the taxpayer\u2019s ordinary income bracket. For all but the highest-paid taxpayers, that is a higher tax rate than the capital gains rate.<\/p>\n<p><strong>Case Study 1: Susan<\/strong><\/p>\n<p>Susan buys some shares for $6,000.<\/p>\n<p>She owns the shares for 6 months and sells them for $6,600. She has no other capital gains or losses.<\/p>\n<p>Susan declares a capital gain of $600 in her tax return. She will pay tax on this gain at her individual income tax rate.<\/p>\n<p><strong>Case Study 2: Ben<\/strong><\/p>\n<p>Ben, an Australian resident, buys a block of land. He owns it for 18 months and sells it, making a profit of $10,000. He has no capital losses.<\/p>\n<p>Ben is entitled to the 50% capital gains tax discount for the land. He will declare a capital gain of $5,000 in his tax return.<\/p>\n<p><strong>Case Study 3: Stephen<\/strong><\/p>\n<p>Stephen bought $2,000 worth of shares (50 shares at $40 per share) in a technology company.<\/p>\n<p>After 18 months he sold the shares. They had fallen in price to $20 per share. He made a capital loss of $1,000.<\/p>\n<p>Stephen also made a profit of $1,500 from selling other shares he held. He had held these shares for five years.<\/p>\n<p>Stephen can deduct the $1,000 he made a loss on from the $1,500 capital gain. This leaves him with a profit of $500. As Stephen held the shares from more than 12-months, he only included half the capital gain in his tax return. He\u2019ll pay tax on this $250 at his marginal tax rate.<\/p>\n<h3>How much capital gains tax will you pay?<\/h3>\n<p>You can work out your capital gains tax using the\u00a0<a href=\"https:\/\/www.ato.gov.au\/Calculators-and-tools\/Capital-gains-tax-record-keeping-tool\/\" target=\"_blank\" rel=\"noopener\">ATO\u2019s online calculator and record keeping tool<\/a>. You can also access the tool and save your data through your\u00a0<a href=\"https:\/\/login.my.gov.au\/las\/mygov-login?execution=e1s1\" target=\"_blank\" rel=\"noopener\">MyGov account<\/a>.\u00a0<\/p>\n<h3>What happens if I make a capital loss?<\/h3>\n<p>You\u2019d make a capital loss on your assets if you sold them for less than you paid for them.<\/p>\n<p>If you make a capital loss, you can use it to reduce a capital gain in the same financial year.<\/p>\n<p>If your capital losses are greater than your capital gains, or if you make a capital loss in a financial year in which you don\u2019t make a capital gain, you can generally carry the capital loss forward and deduct it against any capital gains you make in future years.<\/p>\n<h3>Are there any exceptions?<\/h3>\n<p>There are always exceptions of course. And with capital gains tax the principal exception is if the gain is also assessable under another part of the tax law, for example, if it qualifies as ordinary income. In this situation, the capital gains tax rules take last place. As prime examples, sales of depreciating assets and trading stock are not taxed under the capital gains tax rules because they have their own tax regimes.<\/p>\n<p>Another common exception relates to the disposal of your family home. Provided the house you\u2019re selling is your main residence \u2013 basically the house you live in on a daily basis \u2013 no capital gains tax will arise when it\u2019s sold.<\/p>\n<p>Find out more about capital gains tax transactions, assets and exceptions at the\u00a0<a href=\"https:\/\/www.ato.gov.au\/Individuals\/Capital-gains-tax\/\" target=\"_blank\" rel=\"noopener\">ATO website<\/a>.<\/p>\n<p><span style=\"font-size: 10px\">Important information and disclaimer<br \/>This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. The information in this article is current as at June 2021 but may cease to be accurate in the future.<\/span><\/p>\n<p>NULIS is part of the group of companies comprising IOOF Holdings Ltd ABN 49 100 103 722 and its related bodies corporate (IOOF Group).<\/p>\n<p>Opinions constitute our judgement at the time of preparation. In some cases information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way.<\/p>\n<p>To the extent that the information in this article is or contains advice, it does not take into account any particular person\u2019s objectives, financial situation or needs. Before acting on the information, you should consider the relevant Product Disclosure Statement, consider the product\u2019s appropriateness to you having regard to your personal objectives, financial situation and needs, and consider obtaining independent advice. The Product Disclosure Statement for the MLC Super Fund is available at https:\/\/www.mlc.com.au\/personal\/superannuation\/products or can be obtained by calling 132 652 (Monday to Friday between 8am and 6pm AEST\/AEDT). Returns are not guaranteed and past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the IOOF Group accepts responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.<\/p>\n<p>The post <a rel=\"nofollow\" href=\"https:\/\/mlcsocialfeed.p2.clientcommunity.com.au\/latest-articles\/what-is-capital-gains-tax\">What is 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>Capital gains tax (CGT) is a term you\u2019ll often hear as tax time draws near. When you sell an asset,&#8230;<\/p>\n","protected":false},"author":4,"featured_media":8022,"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 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is capital gains tax? - Adelaide Private Wealth<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/adelaideprivatewealth.com.au\/what-is-capital-gains-tax\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"asim_stellar\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/adelaideprivatewealth.com.au\/what-is-capital-gains-tax\/\",\"url\":\"https:\/\/adelaideprivatewealth.com.au\/what-is-capital-gains-tax\/\",\"name\":\"What is capital gains tax? 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