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Capital Gain Tax

Capital gain

Capital gain is the benefit taxpayers receive when selling CGT assets such as investment or a business asset which can be seen as ‘Capital gain generators’. Generally, it relates to the sale of property, shares of a company or units in a trust or investment fund. In the event of loss, the negative impact of the transaction is considered Capital Loss.

Capital gain tax

Capital gain tax is levied on the net capital gain which derived from CGT events. Generally, CGT events will be triggered by sale of an asset, give away of an asset, when it’s destroyed or lost.

A general formula used to calculate the ‘net capital gain’ is shown below:
(Capital proceeds – Cost base – Capital losses from previous financial year) * Discount factor

This net capital gain will be treated as income and increases the taxpayer’s income tax liability. The tax rate will be the corresponding marginal tax rate.

Discount factor

Discount may be applicable for individuals, trusts and superannuation funds when the asset has been held for at least 12 months. This can be considered as a capital gain tax-free portion of the net capital gain. 50% is applicable for individuals and trusts and 33% for superannuation funds.

Exemptions, rollovers and concessions

There are some assets exempt from CGT, in this area the principal exception is the property for domestic use. Taxpayers are allowed to roll over a CGT event until another CGT event happens in the case of assets related in several events, for example marriage breakdown, etc. Small businesses may be eligible for the small business CGT concessions.

More for exemptions, rollovers and concessions please click here

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