Frequently Asked Questions
You need to check the relevant legislation in your State and Territory, as the rules are different in each jurisdiction.
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Is CGT applicable to all assets?
- In general CGT is applicable only to assets acquired after 19 September 1985 that are normally referred to as CGT assets. If you sell an asset that was acquired before that date no CGT will be payable except in specific circumstances.
- However you may be liable to income tax on the profit made if you are in the business of dealing with such assets.
- If you have a net capital loss in one year it can be carried over and set off against capital gains in the following years. This reduces your net capital gains in those subsequent years.
- CGT assets are not only land and other tangible assets. They also include shares in companies and interests in trusts. Goodwill in a business is a CGT asset.
- You can use our LegalPlan™ membership to call for tenders from experienced lawyers who may be able to assist you with structuring your business assets to minimise CGT.
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Are net capital gains taxed separately or are they added to other assessable income and taxed?
- They are taxed together but calculated separately. It is your net capital gain or loss that is added to your assessable income before calculating tax payable.
- Net capital gains to be included in your assessable income include all your net capital gains:
- minus the 50% deduction if available;
- minus all capital losses for that income year; and
- minus any further available CGT discounts and concessions.
- Net capital gains are gross capital proceeds that you get from disposing of a CGT asset after deducting its cost base. The cost base is essentially the cost of the asset.
- If you have any concerns you can use our free and anonymous Ask a Lawyer service to get information specific to your situation.
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What are CGT events?
- The law contains several events that can result in capital gain or loss and are known as CGT ‘events’. The most common events are:
- disposal of a CGT asset;
- loss or destruction of a CGT asset;
- cancellation, surrender or similar dealings with a CGT asset;
- end of an option to acquire shares;
- creating contractual or other rights;
- creating a trust over a CGT asset;
- transferring a CGT asset to a trust;
- converting a trust to a unit trust; and
- capital payment for trust interest.
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What is the discount percentage?
- If you have owned the CGT asset for at least 12 months before a CGT event such as a sale occurs you will be entitled to reduce the capital gain by 50 percent.
- This discount is available even if you are a partner in a partnership.
- Trusts are also entitled to the discount.
- Companies are not entitled to this discount.
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How are capital gains treated in the case of a partnership?
- When a CGT event happens to an asset of a partnership the partners are considered as having make the capital gain or loss individually in proportion to their interest in the partnership.
- The partnership does not make the capital gain or loss.
- You can use our Phone a Lawyer service for a preliminary legal consultation if you think you may need legal advice.
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What is the cost base?
- Generally speaking this is the amount that is deducted from the proceeds of a CGT event in calculating the net capital gains. It is made up of:
- the acquisition cost which is generally the money paid to acquire the asset;
- any incidental costs including costs of transfer, stamp duty, valuation and advertising costs;
- ownership costs including maintenance costs and financing costs;
- enhancement costs including the costs of installing the asset; and
- title costs including the cost of establishing, preserving and defending your title to the asset.
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What assets does CGT apply to?
- CGT only applies to assets acquired after 19 September 1985.
- Assets acquired before this time are called pre-CGT assets and different taxation rules may apply to their disposal.
- Assets acquired after this date (CGT assets) are divided into three categories:
- collectables;
- personal use; and
- other assets.
- CGT is payable on collectables if their cost of acquisition was over $500.
- CGT is not payable on personal use assets unless their cost of acquisition was over $10,000.
- CGT is payable on most other assets including shares, goodwill, leases and property unless some other exemption such as the main residence exemption applies.
- If you have any concerns you can use our free and anonymous Ask a Lawyer service to get information specific to your situation.
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Is the transfer of assets following divorce a CGT event?
- There are a number of rollover provisions that apply when GGT assets are transferred between spouses following a marriage breakdown.
- In order to apply for the exemption the assets must be transferred under court orders or a court approved settlement.
- The basic rule is that the original cost base and acquisition date are transferred with the asset.
- If a new intangible asset such as a right or an option needs to be created its cost base will be confined to what was actually spent on bringing it into existence. This will include legal fees and stamp duty.
- If the parties decide not to get their agreement made into consent orders or otherwise approved by a court then normal CGT rules apply.
- This can be problematic as the assets will be taken to have been transferred for their market value even if they were transferred for a lower amount between the spouses.
- You can use our LegalPlan™ membership to call for tenders from experienced lawyers who may be able to assist you with minimising your CGT obligations following a divorce.
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Does CGT apply to property owned by a self-managed superannuation fund?
- If you own investment property through a self-managed superannuation fund (SMSF) you will not have to pay CGT if you sell the property after you retire.
- If you sell the property through the SMSF then the rate of CGT you pay will be greatly reduced particularly if the SMSF has held the property for more than 12 months.
- The rules governing CGT and SMSFs can be complex so it is best to get professional advice tailored to your personal circumstances.
- You may like to use our Phone a Lawyer service to get a preliminary consultation about your situation.
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