What is Capital Gains Tax?

2 min read

A capital gain or (loss) happens when you sell an asset. The gain or loss is basically the difference between what you paid for the asset and what you receive when you sell it. If you make a gain, you pay tax on this, which is known as capital gains tax (CGT).

How does Capital Gains Tax work?

Capital gains tax is triggered when a CGT event happens. There are lots of CGT events but the most common are:

  • when you sell an asset
  • when an asset is given away, destroyed or lost
  • if you stop being an Australian resident

CGT operates by taxing any increase in value from the time the asset was acquired or created. The capital gain is taxed in the financial year the asset is sold.

Whilst the amounts that are subject to this tax vary, the resulting capital gain is included in your income for that financial year and taxed at whatever marginal rate you would then pay. The amount that is added into your assessable income is known as the ‘net capital gain’.

How to work out the net capital gain?

To work this out, you take the money you make from selling the asset and subtract your cost base. The cost base includes:

  • the price you paid for the asset originally
  • any costs incurred in buying and selling it
  • other incidental costs

Calculating capital gains can often be very complex. If you’re looking to sell assets and want to understand what the consequences might be, or if you’ve already sold and want to know what your potential tax bill is, speak to one of our experienced tax accountant.

Learn more about capital gains tax with out tax tip guide.

Call 13 23 25 or use our office locator to find your nearest office and book an appointment online.

July 2016

Tax Laws Individual Tax Business Tax
Share with your friends

Book an online appointment today

Our H&R Block accountants are now working online. Book an appointment with an expert.

Related Articles

Australian Laws for Residents and Non-Residents

Being an Australian resident for tax purposes is not necessarily the same as ...
4 min read

Tax Implications When Buying a Holiday Home

Every year, the ATO looks closely at tax claims which relate to holiday homes...
5 min read

What is the Medicare Levy Surcharge?

How does the medicare levy surcharge work and who is liable to pay it?
4 min read

What is Lifetime Health Cover Loading?

Get to know what is lifetime health cover loading and what you need to avoid ...
5 min read