The Tax Office will continue its focus on capital gains tax (CGT) this year as the number of people selling investments during the economic downturn is expected to grow.
Last year 1.1 million people reported more than $14 billion in capital gains on their tax returns, mainly from the sale or disposal of shares and property.
This year the Tax Office will be writing to people who appear to have made capital gains and those who have purchased an investment such as property or shares or units in a managed fund to advise them of their obligations if they dispose of their assets.
A capital gain is generally the difference between the cost of an asset when you purchased it or what it was worth when you obtained it and its value when you dispose of it.
You most commonly have a capital gain to declare if you have sold or given away an asset. Assets which attract CGT include real estate, shares and units in managed funds and unit trusts. CGT may also apply to paintings, antiques and collectables such as coins or stamps.
You may be entitled to an exemption from CGT when you dispose of an asset acquired before 20 September 1985 or a property that is your home.
If you purchase or inherit an asset, or receive an asset as part of a divorce settlement or as a gift you may need to pay capital gains tax when you sell or otherwise dispose of it.
If you dispose of an asset that attracts CGT and make a loss, you may be entitled to claim a capital loss. You offset your capital losses against capital gains on other assets, reducing the overall amount of tax you must pay.
Capital losses from collectables can only be offset against capital gains from other collectables, not against capital gains made on other assets.
The Tax Office is paying particular attention to claims for losses this year to ensure people correctly claim the losses they are entitled to. More detailed information on claiming losses from the disposal of investments is available on the Tax Office website.
The Tax Office uses data from state and territory revenue offices, managed funds, the Australian Stock Exchange and share registries to identify unreported gains on sales of investments. So make sure you report any capital gains or losses carefully in your tax return.
If you’re unsure of your CGT obligations, read the CGT question in e-tax or TaxPack Supplement to help you complete your tax return correctly. The CGT module in e-tax can assist in calculating capital gains or losses for you and has been significantly improved this year to better help you to complete this question in your tax return.
Make sure you keep records when you purchase, acquire, sell or dispose of any asset which may attract CGT. Incomplete records may mean you end up paying more tax than you need to.
Records should show:
- the date you acquired the asset and its cost or market value
- the date you disposed of the asset and what you received for it or its market value
- costs associated with acquiring and selling the asset, such as stamp duty, commissions, advertising and legal fees
- costs associated with holding the asset that are not tax deductible, including improvements, rates, land tax, insurance, repairs and interest on money borrowed to acquire the asset
- all people, businesses or organisations involved in the transaction
- market valuations if required, and
- records from the previous owner, particularly if the asset was inherited.
The Tax Office has several guides available to help you understand your CGT obligations:
- Guide to capital gains tax 2009
- Personal investors guide to capital gains tax 2009, and
- Capital gains tax concessions for small business.
More information, including these guides, is available from the Tax Office website www.ato.gov.au or by calling 13 28 61.
Please read Second Commissioner Jennie Granger’s recent speech 'Tax time in difficult times'.
Interviews with our tax time spokesperson can be arranged by calling Media Relations on (02) 6216 1901.
Audio grabs are available from the media centre at www.ato.gov.au.
Last Modified: Friday, 12 June 2009
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