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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.