Some capital gains are exempt (that is, you don't include them in your assessable income) and some capital losses you must disregard (that is, you can't use them to offset a capital gain and therefore reduce your assessable income).
Exemptions include capital gains or capital losses for:
- your main residence (but there are exceptions)
- your car (that is, a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers), motorcycle or similar vehicle
- pre-CGT assets (assets you acquired before 20 September 1985) with the exception of some pre-CGT shares in private companies, or pre-CGT interests in private trusts, where a combination of factors can occasionally trigger a CGT event giving rise to a taxable capital gain
- personal use items acquired for less than $10,000, and some collectables
- depreciating assets used solely for taxable purposes, and trading stock
- a decoration awarded for valour or brave conduct, unless you paid or exchanged property for it
- assets used solely to produce exempt income or some types of non-assessable non-exempt income
- compensation or damages received for any
- wrong or injury you suffered in your occupation
- wrong, injury or illness you or your relatives suffered
- winnings or losses from gambling, a game or a competition with prizes
- reimbursement or payment of your expenses under the following:
- Unlawful Termination Assistance Scheme
- Alternative Dispute Resolution Assistance Scheme
- M4/M5 Cashback Scheme
- a scheme established by an Australian government agency, a local government body or foreign government agency under an Act or other legislative instrument (for example, regulations or local government by-laws) - 'expenses' in this context does not include a payment for the loss, destruction or transfer of an asset
- the transfer of a super interest in one small super fund (that is, a complying fund that has fewer than five members) to another on the breakdown of a relationship between spouses or former spouses
- rights in relation to a superannuation agreement (as defined in the Family Law Act 1975) being created or ended
- a CGT event happening to the segregated current pension asset of a complying super fund
- some payouts under a general insurance policy, life insurance policy or annuity instrument
- shares in a pooled development fund
- a tobacco industry exit grant under the program known as the Tobacco Growers Adjustment Assistance Programme.
- shares of certain profits, gains or losses arising from disposal of investments by certain venture capital entities
- a financial arrangement where gains and losses are calculated under the TOFA rules
- some types of testamentary gifts.
A capital gain or capital loss you make on your ‘main residence’ (your home) is generally exempt. However, the exemption depends on how you came to own the dwelling and whether you've used it to produce income, such as by renting out all or part of it (see Selling your home).
Collectables include the following items used or kept mainly for the personal use or enjoyment of you or your associates:
- paintings, sculptures, drawings, engravings or photographs; reproductions of these items; or property of a similar description or use
- coins or medallions
- rare folios, manuscripts or books
- postage stamps or first day covers.
A collectable is also:
- an interest in any of the items listed above
- a debt that arises from any of those items
- an option or right to acquire any of those items.
You disregard any capital gain or capital loss you make from a collectable if any of the following apply:
- you acquired the collectable for $500 or less
- you acquired your interest in the collectable for $500 or less before 16 December 1995, or
- you acquired an interest in the collectable when it had a market value of $500 or less.
If you dispose of individual collectables that you would usually dispose of as a set, you are exempt from paying CGT only if you acquired the set for $500 or less on or after 16 December 1995.
Capital losses from collectables can be used only to reduce capital gains (including future capital gains) from collectables. As is the case with any capital loss, there is no time limit on how long you can carry forward a net capital loss from a collectable.
Personal use assets
Personal use assets are CGT assets, other than collectables, used or kept mainly for the personal use or enjoyment of you or your associates. Any personal use asset you acquired for less than $10,000 is disregarded for CGT purposes.
Personal use assets include:
- electrical goods
- household items.
A personal use asset is also:
- an option, or a right, to acquire a personal use asset
- a debt resulting from
- a CGT event involving a CGT asset kept mainly for your personal use and enjoyment
- you doing something other than gaining or producing your assessable income or carrying on a business (for example, making a private loan to a family member or friend).
If you dispose of personal use assets individually that would usually be sold as a set, you get the exemption only if you acquired the set for $10,000 or less.
All capital losses you make on personal use assets are disregarded. This means you can't use capital losses on personal use assets to reduce your capital gains on other personal use assets.
Assets that are not considered to be personal use assets include:
- land and buildings, including your home
- any major capital improvement made to certain land or pre-CGT assets
- shares in a company
- rights and options
- units in a unit trust
- convertible notes
- foreign currency
- contractual rights.
CGT does not apply to most depreciating assets you use solely for taxable purposes (such as business equipment or items in a rental property). Gains (or losses) made on these assets are treated as assessable income (or claimed as deductions) unless the assets were part of a depreciation pool. However, if you've used a depreciating asset for a non-taxable purpose (for private purposes, for example) CGT may apply.
Assets generally exempt from CGT include your home, car, some collectables and personal use assets, and depreciating assets used solely for taxable purposes.