In Australia, you must pay taxes on gains made from the sale of your assets. With the help of this article, you will learn to calculate your capital gains and Capital Gains Tax. We’ll also let you in on how to reduce the amount of Capital Gains Tax you need to pay.

What is Capital Gains Tax?

CGT (Capital Gains Tax) is the tax paid on profits made from selling assets such as investment land, shares, or personal properties that cost over $10,000. This tax is payable when an individual or a group makes a profit – a capital gain – on the sale of an asset. However, if the price you paid for the asset is greater than the price it was sold for, it would be considered a capital loss.

Capital gains are calculated by adding up your gains for the year and subtracting all of your losses from that year, as well as any previous years’ losses that have not yet been reported. This gives you your net capital gains. You record your capital gains and capital losses on your income tax return, so that your Capital Gains Tax can be calculated.

How is Capital Gains Tax Calculated?

Your Capital Gains Tax forms part of your annual tax return. As such, there is no specific tax rate on capital gains – it depends on the tax bracket you fall into when your capital gains are added to the rest of your annual income.

Ways to Reduce Your Capital Gains Tax

It’s worth spending time considering how to reduce your Capital Gains Tax – after all, it could result in a significant reduction in your tax bill! It’s important to understand that tax avoidance is not the same as tax minimisation and is an offence punishable by law. Here are ways you can reduce the amount of capital gains tax, whilst staying on the right side of the law!

• * By conducting property valuations before embarking on a sale to determine the amount you are likely to pay.

• * By exploring the exceptions and concessions granted to certain entities such as small businesses, so that you can fulfil the criteria.

• * By using capital losses from other years to balance out your capital gains from the current year.

• * By delaying a sale. If you own the asset for one year or more, you can get 50% off the Capital Gains Tax for that asset.

Conclusion

Taxes are meant to be paid, but a lack of knowledge can mean we pay more tax than we need to! Using the knowledge you have gained in this article, you can approach your assets and capital gains wisely to keep your Capital Gains Tax to a minimum.