What are the basic rules of Capital Gains Tax?

Basically, Capital Gains Tax is a tax on the increase in value of your assets which is included in your tax return each year. The Capital Gains tax is included as an element of income tax and occurs at the marginal rate which you income tax is calculated at. Your capital losses are also included in the calculation of the capital gain, so you are assessed on the basis of your net capital gain which is:

Total capital gains for the year – Total capital losses for the year + unapplied net capital losses from earlier years – CGT discount and small business CGT concessions to which you are entitled.

If you had more gains than losses in the year and therefore had a net capital gain or loss when a Capital Gains Tax event occurs. In the case of almost all Capital Gains Tax Assets, there is a need to calculate the difference between the cost base of the asset and the amount realized when it is sold. A Capital gain occurs when there is an increase between the sale price and the cost price of the asset and a Capital loss occurs when there is a decrease between these two figures. Also, the Capital Gains Tax Was introduced in 1985 which means that assets which were acquired before this time are not subject to the calculation of CGT.

The calculation of capital gains tax involves a very complicated set of rules. Although accountants often deal with these issues, it can also be helpful to obtain the advice or assistance of a taxation lawyer to advise on the legal aspects of a capital gains tax transaction. If you have a query about capital gains tax law or need to contact a taxation lawyer, we have specialists available to assist you in relation to these matters. Please contact us using the contact methods available on this site.