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CAPITAL GAINS TAX
 

APPLIES TO ASSETS PURCHASED AFTER 19 SEPTEMBER 1985

CALCULATION

Sale price - cost base = Capital gains

Capital gains tax = Capital gains after discounts x individual tax rates

REAL ESTATE CAPITAL GAINS TAX
COST BASE
Acquisition costs:

Purchase Price less any depreciation claimed as a tax deduction.

Incidental costs:

Stamp Duty
Legal Fees
Pest & Building Inspections

Advertising for sale
Commissions on sale
Legal fees on sale

Ownership costs not already claimed as a tax deduction: e.g. non income producing property.

Interest & refinancing, maintenance & repairs, insurance, rates and land tax.

Enhancement costs:

Capital Improvements less any depreciation claimed as a tax deduction.


Amounts not included:

Any costs that have been claimed as a tax deduction e.g. depreciation on plant & buildings.

Main residence:

There is usually no capital gains tax on your main residence.


SHARES CAPITAL GAINS TAX
COST BASE
Purchase price

Brokerage on purchase

Brokerage on sale


 DISCOUNT PERCENTAGE
If the asset is owned for > 12 months.

50% if the gain is made by an individual

33 1/3% if the gain is made by a superannuation fund.

NON-RESIDENT CAPITAL GAINS TAX AFTER 8 MAY 2012

DISCOUNT PERCENTAGE

If the asset is owned for > 12 months.

From 8 May 2012 foreign or temporary resident individuals must meet certain eligibility to apply the CGT discount.

For CGT events occurring after 8 May 2012, the application of a CGT discount percentage will depend on:

i)  whether the CGT asset was held before or after 8 May 2012 and

ii) the residency status of the individual who has the capital gain.

 

This change will affect individuals who are:

i) a foreign or temporary resident;

ii) an Australian resident with a period of foreign residency after that date;

iii) had a discount capital gain from a CGT event that occurred after 8 May 2012.

 

Foreign or Temporary Residents

If you were a foreign or temporary resident on 8 May 2012, you may choose to get a market value for the CGT asset as at 8 May 2012 and use a market value calculation.

This will apportion the CGT discount to take into account the capital gain you have that was accrued before 8 May 2012.

Use the ATO calculator

Australian Residents

If you are an Australian resident, you must calculate the CGT discount you can apply to the capital gain if you have:

i) a capital gain from a CGT event after 8 May 2012 and

ii) a period of foreign or temporary residency.

Use the ATO calculator

 

Foreign Residents and Main Residence Exemption

Foreign residents will no longer be entitled to claim the main residence exemption when the sell property in Australia.

If you are a foreign resident when a CGT event happens to your residential property in Australia, you will no longer be able to claim a main residence exemption when you use the exemption as a reason to vary your foreign resident capital gains withholding rate or when you lodge your income tax return as a non resident.

This will apply from 1 July 2019 and the property was held prior to 9 May 2017.

CAPITAL GAINS TAX CONCESSIONS FOR SMALL BUSINESS
A small business must have assets of < $6,000,000 or annual turnover of < $2,000,000 or your asset was used in a closely connected small business.

50% reduction for assets held for > 12 months.

Plus 50% reduction for active assets.

Plus 100% reduction if asset owned for 15 years and you are > 55 and retiring or permanently incapacitated.

Plus 100% if used for retirement up to $500,000 lifetime limit per individual after you use the above discounts.

Plus 100% if rolled over to acquire a replacement asset or incur expenditure on making capital improvements to an

existing asset within 2 years.



 CAPITAL GAINS TAX CONCESSIONS  FOR SMALL BUSINESS IN A COMPANY
The only way to distribute income out of a company is as wages, dividends or the sale of shares which are usually deemed dividends on winding up or the sale of goodwill.

However if you pass 'the significant individual test' in a trust or company these concessions may apply.

When this income is received by the taxpayer it is 100% assessable income plus associated franking credits if applicable.

You may receive capital gains rollover relief if you purchase another business within 2 years.

$500,000 exemption for small business is if the payment is used for retirement.

The $500,000 lifetime limit per individual for retirement is calculated after you use the small business discounts.

 

DECEASED ESTATES

ASSETS ACQUIRED PRIOR TO 20 SEPTEMBER 1985

The first element of the cost base is the market value as at the date of death.

ASSETS ACQUIRED AFTER TO 19 SEPTEMBER 1985

The first element of the cost base is the deceased person's cost base.

MAIN RESIDENCE INHERITANCE EXEMPTION

If you dispose of the property within two years of the deceased person's date of death then there is no capital gains.

If it was not disposed within two years of the date of death then the exemption is available where the dwelling was not used to produce income and the property was the main residence of either the deceased, the decease's spouse or an individual who has the right of occupancy under the will from the time of the decease's death until the taxpayer disposes of it.

ASSET REGISTERS

You can choose to enter information from your CGT records into an asset register. If you keep an asset register, you may be able to discard records that you might otherwise need to keep for a long time.

If you choose to keep an asset register, transfer the following information to it from the records you generally need to keep for CGT purposes:

This information must be certified by a registered tax agent or a person approved by the Commissioner.

If you use an asset register, you must keep the documents from which you have transferred the information for five years from the date the relevant asset register entry is certified. You must keep the asset register entries for five years from the date the related CGT event happens. Keep the asset register for a longer period if you need to substantiate any carried forward net capital losses, for five years after any CGT event where you have applied any capital loss against capital gains.


 

EXEMPTIONS AND ROLLOVERS

A number of assets are exempt from CGT, including your home, car, some collectables and personal use assets, and depreciating assets used solely for taxable purposes.

In certain circumstances you can defer or disregard a capital gain on a CGT event until another CGT event happens. This is called a ‘rollover’. 

For example, if an asset is transferred from one spouse to another following a marriage or relationship breakdown, any tax payable is automatically deferred until another CGT event happens, such as selling the asset to someone else.



Disclaimer
The information provided in the above documents is not intended to be, nor should it be construed as tax advice. Any specific recommendation for a client can only be done after their individual circumstances have been determined by David Douglas Accountants.

We have clients from the following locations:

Brisbane, Gold Coast, Sydney, Newcastle, Sunshine Coast, Cairns, Canberra, Melbourne, Adelaide, Perth, Darwin.

Brisbane, Albion, New Farm, Teneriffe, Newstead, Windsor, Wilston, Bowen Hills, Wooloowin, Herston, Lutwyche, Hamilton, Eagle Farm, Gordon Park, Fortitude Valley, Clayfield, Ascot, Hendra.

Morayfield, Burpengary, Caboolture, Bellmere, Wamuran, Narangba, North Lakes, Mango Hill, Kallangur, Dakabin, Deception Bay, Bribie Island, Elimbah, Kippa-Ring.

We do tax returns for individuals, trusts, companies, partnerships, contractors, ABNs and sole traders.

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