A1: What is capital gains tax and what rate of tax do you pay?
CGT is the tax you pay on any capital gain that you include on your annual income tax return. It is not a separate tax, merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate.
Your net capital gain is:
- your total capital gains for the year
- your total capital losses for the year and any unapplied net capital losses from earlier years
- any CGT discount and small business CGT concessions to which you are entitled.
If your total capital losses for the year are more than your total capital gains, the difference is your net capital loss for the year. It can be carried forward to later income years to be deducted from future capital gains. (You cannot deduct capital losses or a net capital loss from your income.) There is no time limit on how long you can carry forward a net capital loss. You apply your net capital losses in the order that you made them. More information on how to apply your capital losses is in step 8 of Part B Sale of shares or units, and step 4 of Part C Distributions from managed funds.
You make a capital gain or a capital loss if a CGT event happens. The disposal of an asset is an example of a CGT event. You can also make a capital gain if a managed fund or other trust distributes a capital gain to you.
You write the total of your current year capital gains at H item 18 on your Tax return for individuals (supplementary section) 2016. You write your net capital gain at A item 18 on your tax return (supplementary section).
This guide only covers capital gains or capital losses from CGT assets that are shares, units or other interests in managed funds.