The following information has been obtained from the Australian Taxation Office website - it is provided for information only. For further information or to check the latest updates please visit the Australian Tax Office @ www.ato.gov.au
Capital Gains Tax
A capital gain - or capital loss - is the difference between the purchase cost for an asset and what you sold the asset for.
You pay tax on your capital gain. It's not a separate tax, just part of your income tax, although it is generally referred to as capital gains tax (CGT).
If you make a loss on the sale of an asset it is referred to as a capital loss. A Capital Loss cannot be claimed against your income, but you can use it to reduce a capital gain in the same income year. If your capital losses exceed your capital gains or you make a capital loss in an income year you don't have a capital gain, you can generally carry the loss forward and deduct it against capital gains in future years.
All assets acquired since 20th September 1985, when capital tax came to effect, are subject to CGT unless specifically excluded.
Selling assets such as real estate or shares is the most common way you make a capital gain or capital loss.
Most main personal assets are exempt from Capital gains tax (CGT), including your home (unless you rented it out for a time or it's on more than two hectares of land), car, and most personal use assets, such as furniture. Capital gains tax (CGT) also doesn't apply to depreciating assets used solely for taxable purposes, such as business equipment or fittings in a rental property.
If you're an Australian resident, Capital gains tax (CGT) applies to your assets any where in the world.
Calculating Your Capital Gain / Capital Loss
Cost Base
(what it cost you to get the asset)
minus
Capital Proceeds
(What you received when you disposed of it)
=
Capital Gain or
Capital Loss
The amount you declare on your income tax return is the total of your capital gains for the year, less any capital losses you incurred and any Capital Gains Tax discounts or concessions you're entitled to. There are three methods to work out your capital gain. You choose the method that gives you the best result (that is, the method that gives you the smallest capital gain). The three methods are the Discount Method, the Indexation Method and the 'Other' Method, each of these methods are discussed in the table below.
| Method | Description | Calculation of the amount you declare on your income tax return |
| Capital Gains Tax (CGT) Discount For assets held for 12 months or more | Allows you to reduce the gain by a percentage discount
| Your Capital Gain minus any capital losses you incurred. This amount is discounted by the relevant percentage. |
| Indexation For assets acquired before 21 September 1999 and held for 12 months or more | Base cost can be increased by applying an indexation factor based on CPI up to September 1999. | Apply the relevant indexation factor to the base cost, then subtract the indexed cost base from the capital proceeds |
| Other For assets held for less than 12 months | Basic method of subtracting the cost base from the capital proceeds | Subtract the cost base from the capital proceeds |
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