Understanding the Basics of Capital Gains Tax

Understanding the Basics of Capital Gains Tax

Do you want to make sure you aren’t paying too much Capital Gains Tax? Agilis CA can help ensure you receive any exemptions, discounts, or small business concessions allowed, as well as check for special circumstances. 



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What is Capital Gains Tax? 


A capital gain (or loss) occurs when an asset is sold. The difference between the purchase price and the sale price is the gain or loss. Capital Gains Tax (CGT) applies to money you have made (profits) from selling an eligible asset.

Capital gains tax events occur when an asset is sold (e.g., property), or other triggers arise, such as the loss, theft, or destruction of an asset, or creating contractual or other rights to an asset.

Capital gains and losses are reported on your income tax return, with tax paid on your capital gains. It is important to note, that even though it is cited as “Capital Gains Tax”, it fundamentally is part of your income tax – not a separate tax. 

Therefore, if you have a capital gain, the tax you are required to pay subsequently increases – highlighting the importance of calculating how much tax you owe. Agilis CA can help via our Tax Planning services. 


What Assets are Subject to CGT? 


Not all assets are subject to CGT. Common exemptions include main residence or family homes, granny flats, cars and motorcycles, personal use assets such as boats, furniture, household items or loans to family and friends. 

Many types of lump sum payments are also not subject to CGT, and business sales may also be exempt depending on the circumstances.

Most property is subject to CGT, including land, commercial premises, rental properties, holiday houses and hobby farms. CGT also applies to shares, investments, cryptocurrency, many collectables, foreign currency, and intangible assets.

Moreover, there are special rules for specific situations, such as – inheriting assets, relationship breakdown, foreign residents, insurance, or compensation payments.

For a more in-depth overview of CGT assets and exemptions, click here to visit the ATO website. 


How is the Tax Calculated? 


Tax is calculated on the net gain of an asset sale. Tax is payable on the difference between the purchase price and sale price, less any discount allowed. There is a 50% CGT discount for Australian individuals if they own an asset for 12 months or longer. 

When you sell an asset for more than it cost you, you have a capital gain

When you sell an asset for less than it cost you, you have a capital loss

The type of CGT event affects how and when capital gains tax is calculated. For example, if an asset is destroyed in an accident, the CGT event occurs when the insurance payout is received.

Good record keeping is key to working out capital gains tax accurately. Make sure you keep all documents related to asset purchases, including contracts, expenses valuations and disposal.

CGT is calculated at the time of completing your individual, business or self-managed super fund tax return and is included in the income tax assessment.

Click here to visit the ATO website to see how you can calculate your CGT 


Talk to Agilis CA today if you need help with your tax planning 


To make tax calculations as easy as possible, it is important to ensure you keep all your asset records.

Contact Agilis CA today to make sure you aren’t paying more tax than you should, and are receiving any exemptions, discounts or small business concessions allowed.




This blog was originally published by BOMA, but has had edits made by Agilis CA for the benefit of our readers. 


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Agilis Chartered Accountants

Agilis Chartered Accountants provides tailored accounting services, offering clients a high level of personalised advice and support - from individual tax to business consultancy. With a commitment to driving success, we provide comprehensive accounting and advice solutions that ensure every stage of your journey is met with the utmost efficiency. From startup through expansion and growth, our services make it easier for you to achieve business objectives – ultimately leading towards greater financial stability.