Capital Gains Tax + Advice

Helping you understand the tax you pay when it comes to selling assets +/or investments!

Capital Gains Tax Expert Advice

Capital Gains Tax… those three golden words that can sometimes send shivers down your spine! 

Some of the most common questions we are asked by our clients when it comes to Capital Gains Tax are:

  • When do we pay Capital Gains Tax?
  • Is there a Capital Gains Tax on real estate?
  • How much tax do you pay on Capital Gains?
  • Is there a Capital Gains Tax when it comes to cryptocurrency?

For many people, their first experience would be a capital gain or a capital loss on property.  However, this can also apply to shares, art, cars and managed funds to name a few as well as a range of other personal use assets if they are of a certain value.  Capital Gains Tax comes under the heading of income tax.

What is Capital Gains Tax?

Broadly, Capital Gains Tax (CGT) is the tax that is payable on the profit you receive when you sell an asset or an investment if the asset was acquired after 20th September 1985.

The profit made is the difference between what it cost you to acquire the asset and what you receive when you sell or dispose of the asset. 

There may be some other capital or holdings costs to take into account to make sure that the resulting profit or loss is correct.

What Assets Do You Have To Pay Capital Gains Tax On?

You may be surprised to know that a person’s main place of residence (their home) is exempt from Capital Gains Tax.  However, this may not be the case if any of the following apply:

  • Part of it is rented out for income (this doesn’t include a “granny flat arrangement”);
  • It is being used for business purposes; or
  • It is on more than two hectares of land.

Cars and motorbikes are also exempt from Capital Gains Tax unless they have been used in a business.  Personal use assets, such as boats, electrical goods and household items are subject to Capital Gains Tax when sold if their purchase cost was greater than $10,000.

Collectables such as jewellery, antiques and artwork are subject to Capital Gains Tax when sold if their purchase price was over $500.  The sale of shares which have been held as an investment (rather than used in a share trading business) can also attract Capital Gains Tax.

Capital Gains Tax also applies to inherited items of a certain value, but it doesn’t apply to assets that have been acquired before 20th September 1985.

Finally, selling or disposing of assets within 12 months after purchase will mean paying the full amount of Capital Gains Tax calculated.  However, if these assets are held for over 12 months it means that you may be eligible for a 50% discount on the amount of Capital Gains Tax to be paid.

Capital Gains Tax Process

So, how is Capital Gains Tax calculated?

Any increase in value from the time the asset was acquired is calculated by subtracting the cost involved in acquiring and holding an asset (the cost base) from the proceeds of the sale of the asset.  From this total – the gross capital gain – are subtracted any eligible capital losses from other assets and this then gives you, the net capital gain.  You will pay tax on the resulting gain at your marginal tax rate.

It is always a good idea to get advice from your Accountant and/or your Financial Adviser to ensure that you are complying with current legislation and maximising your potential tax return.

Capital gain events can be quite complex, particularly when you are dealing with shares, capital expenditure on property or sales of businesses.

Our Accounting team will make sure that you are using the correct dates for purchase and sale, that all costs are included and that the Capital Gain or the Capital Loss is included in the correct financial year.

Capital Gains Tax FAQs

The tax you pay is your marginal tax rate in the financial year that you make the gain.

You are taxed on the profit that you make on the sale or disposal of an asset.

The net gain is calculated and then added to any other taxable income you have in the year that you make a profit on the sale or disposal of an asset.

You pay the tax after the end of the financial year that you have made the capital gain

Access Our Free Guide on Capital Gains Tax

Want even more information on Capital Gains Tax?

Download our free guide to find out how we are able to work with our other service arms to ensure that no matter what asset you are looking at parting with, we can advise you on how to come out the other end in the best possible position.

Enter your details to access our free guide and please make sure “pop-up’s” aren’t blocked so you can view the document once it has finished downloading!

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