Capital Gains Tax

Capital Gains Tax


What is it? Or how you end up with a CGT?

CGT is a result of selling an income producing assets. A common example of a capital gain tax assets are the sell of rental investment and shares.

How does it tax?

You usually make a capital gain or a capital loss on the sale of those assets. This is the difference between the purchase price and the selling price. If you make a gain, it will be included as part of your assessable income and you will pay tax on it based on your bracket rate.

Whereas, if you make a loss, you cannot use that loss to reduce your assessable income. The loss will be carried forward to offset against future capital gain. The carried forward losses can be carried forward indefinitely.



Points to Remember!

·If you have held the asset for more than 12 months before disposing of it, you can get a 50% discount on the capital gain.

·Sale of rental investment – 6 years exemptions rule: if you rent out your property for 6 years or less, you can use this rule to avoid any capital gain tax. Example: if you purchase a house live in it for a bit and you need to relocate overstate. You put the house up for rent. As long as you didn’t purchase another house, your main residence will remain with the first house that you are renting out. For tax purposes, when you are living in a rental house, that house cannot be your principal residence. You can only have one main resident at a time.

5 years later you return home and decided to sell the rental house. Because you did not have any other main residence in the 5years, you can use this rule to avoid any capital gain. You do not pay any tax on the gain of selling your main residence.

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