When CGT assets – such as shares and property – are sold, CGT may payable. However, the family home may be exempt if not used for income producing purposes. The gain (essentially the sale proceeds less the cost base) is counted as part of your assessable income and taxed at your marginal tax rate (which can be as high as 47% for individuals).
If you have owned the asset for more than 12 months, individuals are eligible for a 50% discount (meaning they only pay tax on 50% of the gain), while super funds are eligible for a one-third discount (they pay tax on two-thirds of the gain). There is no discount for companies that own assets. For this reason, eligible parties may wish to delay any sale until the 12-month ownership timeframe is met, and therefore enjoy a discount.
The good news is that capital gains can be offset by capital losses, and if the losses cannot be applied, they may be able to be carried forward from one tax year to the next and then applied to offset a capital gain. If you make a capital loss, don’t forget about it, and keep records of it!
If you have made a gain in 2020/2021, consider the following:
- Do you have any carried forward capital losses from 2019/2020 that you can apply?
- Have you made losses on other assets in 2020/2021 that you can apply?
- Do you currently have assets in a loss situation that you should sell now to crystalize a loss?
While you should never do anything just for tax reasons, crystalizing a loss on a non-performing asset can often make sense.
Conversely, if you have made a capital loss during the year, you may want to consider the disposal of assets in a gain situation that you may have been contemplating selling anyway.
Talk with us before implementing any of these strategies.
