Capital Gains Tax

A capital gain or capital loss on an asset is the difference between what it cost you and what you receive when you dispose of it. You pay tax on this gain and forms part of your income tax and is not considered a separate tax but is referred to as capital gains tax (CGT)

CGT events are the different types of transactions that may result in a capital gain or loss. Events are grouped into the following categories:

  • Disposal
  • Hire purchase and similar agreements
  • End of a CGT asset
  • Bringing a CGT asset into existence
  • Trusts
  • Leases
  • Shares
  • Special capital receipts
  • Cessation of residency
  • Rollovers
  • Consolidations

A CGT asset is any kind of property, or a legal or equitable right that is not property. CGT assets include:

  • Land and buildings
  • Shares in a company
  • Units in a unit trust
  • Options
  • Debts owed to you
  • A right to enforce a contractual obligation
  • Foreign currency
  • Part of, or an interest in, a CGT asset
  • Goodwill or an interest in it
  • An interest in an asset of a partnership
  • An interest in a partnership that is not an interest of a partnership asset

There are various methods you can use to work out out your capital gain, being the CGT discount method, Indexation method or other method. Click here to locate the calculator that best suits your situation.

If you have not made a capital gain, this may mean that you have made a capital loss. Capital losses can only be offset against capital gains, not against any other income. A net capital loss in an income year can be carried forward to offset against capital gains in later income years.

Some assets are generally exempt from CGT, including your home and car, and depreciating assets used solely for taxable purposes.

Exemptions include capital gains or capital losses for:

  • Your main residence (but there are exceptions)
  • Your car, motorcycle or similar vehicle
  • Pre-CGT assets
  • Personal use items acquired for less than $10,000
  • Depreciating assets used solely for taxable purposes
  • A decoration awarded for valour or brave conduct
  • Assets used solely to produce exempt income
  • Compensation or damages received
  • Winnings or losses from gambling, a game or a competition with prizes
  • Transfer of a super interest in one small super fund to another on the breakdown of a relationship
  • Rights to a superannuation agreement being created or ended
  • A CGT event happening to the segregated current pension of a complying super fund
  • Some payouts under a general insurance policy
  • Shares in a pooled development fund
  • A payment or grandt under prescribed industry re-establishment or exit grants
  • Shares of certain profits, gains or losses are calculated under the TOFA riles
  • Some types of testamentary gifts

You may be allowed to rollover a capital gain until another CGT event happens in the case of assets invloved in the following events:

  • Marriage or relationship breakdown
  • Loss, destruction or compulsory acquisition
  • Mining lease
  • Scrip for scrip
  • Demergers
  • Other replacement-asset rollovers
  • Other same-asset rollovers

The following concessions may allow you to disregard or defer some or all of a capital gain from an active asset in a small business