Capital Gains Tax (CGT) is a tax levied on the profit made from the sale of assets such as property, shares, investments or collectables. In Australia, CGT is not a separate tax but is included in your Income Tax Return.

How CGT Works

CGT applies to assets that are sold or disposed of such as real estate, shares, or collectibles. The capital gain is the difference between what you paid for the asset (the cost base) and the amount you received when you sold it. If the sale price is higher than the cost base, you make a profit, which is subject to CGT.

CGT Discounts and Exemptions

• Main Residence Exemption: If the asset is your primary residence, you may be exempt from CGT when you sell it, provided you meet certain conditions.
• 50% CGT Discount: For individuals who have held an asset for more than a year, a 50% discount on the capital gain applies.
• Small Business CGT Concessions: Small businesses may be eligible for a variety CGT concession that reduce the tax burden when selling business assets.

When is CGT Paid?

CGT is generally due when you file your tax return for the year in which the asset was sold. The profit is added to your taxable income, and you pay tax based on your overall income tax rate.

CGT is an important consideration when selling assets in Australia. Understanding how it works, and the exemptions or discounts available can help you manage your tax liability effectively. If you’re unsure about CGT and how it applies to your situation, Sixth Sense Tax can provide guidance and make this process smooth and simple.