The Australian Taxation Office (ATO) says that ‘CGT is the tax you pay on a capital gain. It is not a separate tax, just part of your income tax. The most common way you make a capital gain (or capital loss) is by selling assets such as real estate, shares or managed fund investments. Managed funds also distribute capital gains you must report.’
What is a capital gain?
‘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,’ the ATO says.
You usually need to declare a capital gain 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.
What is a capital loss?
‘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,’ the ATO says.
So, what does it all mean in terms of property?
Basically, a capital gain on a property occurs when the capital proceeds received are more than the cost base of the property. The net capital gain made must then be declared as part of the recipient’s taxable income.
DISCLAIMER: All information provided in this article is of a general nature only and is not personal financial, taxation or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this article (including Award Accounting for Business Success Pty Ltd, each of its directors and employees) will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.