Capital Gains Tax: A Comprehensive Guide

Understanding Capital Gains Tax (CGT)

Capital gains tax (CGT) is a tax levied on profits generated from the disposal of assets, such as investments (e.g., property, shares) and crypto assets. In the context of the Australian taxation system, CGT is applied to capital gains realized upon the disposal of any asset with a cost base (purchase price plus relevant expenses).

CGT Discount for Australian Residents

Australian resident individuals are eligible for a CGT discount of 50% if they have held an asset for 12 months or more before disposing of it. This discount reduces the amount of capital gain subject to taxation.

Calculating Capital Gains

Capital gains are calculated as the difference between the disposal proceeds (sale price) and the cost base of the asset. For example, if you sell a property for $600,000 and its cost base was $400,000, your capital gain would be $200,000.

Tax Rate

Capital gains are taxed at the same rate as taxable income. If you earn $40,000 per year (falling within the 32.5% tax bracket), and make a capital gain of $60,000, you would pay $19,500 in CGT.

Reporting and Paying Capital Gains Tax

You must report capital gains on your annual tax return. The Australian Taxation Office (ATO) provides a capital gains calculator to assist in determining the tax payable. You can pay CGT through your tax return or by installments throughout the year.