• Capital gains tax

    If you sell a capital asset, such as real estate or shares, you usually make a capital gain or a capital loss. This is the difference between what it cost you to acquire the asset and what you receive when you dispose of it.

    You need to report capital gains and losses in your income tax return and pay tax on your capital gains. Although it's referred to as capital gains tax (CGT), this is actually part of your income tax, not a separate tax.

    When you make a capital gain, it is added to your assessable income and may significantly increase the tax you need to pay. As tax is not withheld for capital gains, you may want to work out how much tax you will owe and set aside sufficient funds to cover the relevant amount.

    If you make a capital loss, you can't claim it against your other income but you can use it to reduce a capital gain.

    All assets you’ve acquired since tax on capital gains started (on 20 September 1985) are subject to CGT unless specifically excluded.

    • Most personal assets are exempt from CGT, including your home, car and personal use assets such as furniture.
    • CGT also doesn’t apply to depreciating assets used solely for taxable purposes, such as business equipment or fittings in a rental property.

    The point at which you make a capital gain or loss is usually when you enter into the contract for disposal, not when you settle. So if you sign a contract to sell an investment property in June 2017, and settle in August 2017, you need to report the capital gain or loss in your 2016–17 tax return.

    If you’re an Australian resident, CGT applies to your assets anywhere in the world. For Norfolk Island residents, CGT applies to assets acquired from 23 October 2015. Foreign residents make a capital gain or loss if a CGT event happens to an asset that is 'taxable Australian property'.

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    Last modified: 24 Oct 2017QC 22147