Australian Capital Gains Tax

Australian Capital Gains Tax Background

Australian Capital Gains Tax or C.G.T. was first levied by the Hawke/Keating government in 1985 and is applied only to assets purchased after that date. Australian Capital Gains Tax is not a stand alone tax but is applied the year an asset is sold and is included at your marginal rate.

Australian Capital Gains Tax Example

There is a formula for better understanding of Australian Capital Gains Tax:

Net Capital Gains = Total Capital Gains – Total Capital Losses + any Capital Losses carried forward

Australian Capital Gains Tax Exemptions

Exemptions from Australian Capital Gains Tax include:

  • Assets purchased before September 1985.
  • Taxpayer’s main residence is exempted from Australian Capital Gains Tax.
  • Personal assets up to $10,000 e.g. Caravan, boats.
  • Capital losses linked to personal assets.
  • Collectables up to $500 e.g. jewellery, stamps.
  • Cars motorcycles are exempt from Australian Capital Gains Tax.
  • Compensation for occupational injury.
  • Gambling is exempted from Australian Capital Gains Tax.
  • Life assurance policy surrendered or sold.
  • Trading Stock is exempted from Australian Capital Gains Tax.

Things to Remember About Australian Capital Gains Tax

There are number of things you should remember about Australian Capital Gains Tax:

  • If assets are held for more than one year gains are discounted by 50% for individuals and 331/3% for superannuation funds.
  • Net losses incurred can be carried forward but not offset against income.
  • Australian Capital Gains Tax is a regressive tax. i.e. the rate decreases as the account taxed increases.