Picture this: you’ve finally sold a prized investment property, or perhaps you offloaded some shares. The relief of extra funds in your pocket quickly turns to panic—“How much is capital gains tax? Will I be left with crumbs after the tax office takes its share?” These questions can create a frenzy of worry and confusion. But fear not! We’re here to guide you through these complexities with clarity, a dash of humour, and an authoritative perspective. By the end, you’ll know exactly what CGT is, how it’s calculated, and how you can manage it effectively in Australia—particularly pertinent if you’re planning ahead for 2025.
Below, we navigate key questions about CGT. Along the way, we’ll break down the labyrinth of rules, highlight current research on tax laws, and even show you where some sweet (legal) discounts might apply.
“Capital gains tax” is the term used to describe the tax you pay on any profit you make from selling assets such as property, shares, or even valuable collectibles (in certain circumstances). In Australia, CGT itself isn’t a separate tax rate—rather, any net capital gain you have is included in your overall assessable income and taxed at your marginal rate.
Since 1985, Australia has taxed profits on certain capital assets, though you can rest easy if you own a pre-1985 asset; such assets are generally exempt. Now, thinking ahead to 2025, many wonder if major CGT rules will radically change. As of the most recently available information, the fundamental CGT framework in Australia remains consistent:
• Any capital gain (i.e., profit from your sale) is added to your assessable income.
• If you’ve held the asset for one year or longer, you may be eligible for a CGT discount.
• Certain assets like your primary residence are typically exempt.
While income tax brackets are undergoing changes in July 2024—such as reduced rates for middle-income earners—capital gains themselves are still subject to your prevailing marginal tax rate. So, in 2025, expect that your net gain merges with your other annual income. That begs the question: “How do I actually distinguish a capital gain from ordinary income?”
A capital gain arises from selling something for a higher price than your cost base. The cost base includes not just the initial purchase price but also incidentals such as stamp duty, conveyancing fees, and other costs directly related to the acquisition or sale. Subtract that cost base from the asset’s selling price, and voilà, you have your capital gain.
This might be the one time you’ll be pleasantly surprised to utter, “I’ve made a loss.” Because if you indeed suffer a capital loss, the tax office won’t penalise you. Instead, capital losses can be used to offset capital gains.
In practice, here’s how it works:
Take Rhi’s scenario (from the research data) as a classic illustrative example:
• She sells an investment property, making a $70,000 capital gain.
• She simultaneously sells shares, incurring a $4,500 capital loss.
• Netting these out gives her $65,500 in gains.
• Eligibility for the 50% discount then potentially halves the $65,500, resulting in a $32,750 taxable gain.
If you’re saddled with losses from shares in the short term, it might incidentally reduce that chunk you pay in CGT. No one loves losing money, but at least you can carry forward that capital loss to diminish your taxable gains in subsequent years. Think of it as a silver lining on an otherwise rainy financial day.
When Australians ask, “How much is capital gains tax?” one of the biggest reliefs to highlight is that you could reduce your CGT. Australia provides a few key discounts and exemptions:
• 50% Discount for Individuals and Trusts: If you’re an Australian resident and hold the asset for at least 12 months, you shave off half your capital gain. This discount is a game-changer; you’ll effectively only declare half.
• 33.33% Discount for Complying Superannuation Funds: For most people, super funds automatically use this discount in CGT calculations.
• 0% Discount for Companies: Yes, it’s zero, zilch, nada. Companies do not benefit from the CGT discount.
• Additional 10% Discount for Affordable Housing Providers: Owners offering affordable rental housing can qualify for up to a 60% total discount.
• Principal Home Exemption: Your main residence is usually free from CGT. If you move out or use part of the home for generating income, though, you might have to pay partial CGT.
• Assets Acquired Before 20 September 1985: Score one for timing! If you own assets that became yours before this date, CGT generally doesn’t apply.
• Personal Car and Other Personal-Use Assets: Generally, your family vehicle and certain personal items are exempt.
• Rolling Over CGT in Divorce: If you transfer assets in certain family law scenarios, CGT can be deferred.
It’s vital to confirm how these rules apply to you, because the discount or exemption you use can drastically alter your final tax bill. Before you get too excited, also note that certain assets—like those first used as a rental property less than 12 months before the sale—could disqualify you from the discount, so read the fine print carefully.
You might be thinking, “So, how do I put it all together? I just want to know how much is capital gains tax going to be for me in 2025!” The steps to compute CGT can be the same as they are now, but let’s outline the framework in a concise manner:
Below is a simple table illustrating who might benefit from which CGT discount level, according to currently available Australian tax rules:
| Entity Type | Held Asset ≥ 12 Months? | CGT Discount |
|---|---|---|
| Australian Resident (Individual) | Yes | 50% |
| Australian Resident (Individual) | No | 0% (no discount) |
| Trust (Resident) | Yes | 50% |
| Superannuation Fund | Yes | 33.33% |
| Company | N/A | 0% |
| Affordable Housing Owner | Yes, meets criteria | Up to 60%* |
*The additional 10% requires meeting specific affordable rental housing requirements.
As you can see, the discount can significantly lower your overall tax exposure. For instance, if you sold an investment property after 18 months for a gain of $100,000, and you’re an individual, your taxable gain might drop to $50,000, which then gets taxed at your marginal rates.
So, you’ve done the sums and arrived at your net gain or loss. The next step is to report it—and pay any tax due. In Australia, capital gains (or losses) are reported annually on your income tax return. The Australian Taxation Office (ATO) recommends:
• Keeping good records from day one. This includes purchase invoices, improvement costs, loan agreements, and sale documents.
• Using the ATO’s online CGT calculators to help translate your gains or losses into the correct figures for your return.
• Making use of myID (previously myGovID) to securely access the ATO’s digital services.
Payment occurs when you pay your total individual or company tax bill for the year. If you know you’ll owe a bigger chunk, you might consider setting aside funds, lodging quarterly instalments, or chatting with a chartered accountant to avoid year-end shocks.
Interestingly, if you’re an Australian resident and traded property on a contract date, that date generally triggers the CGT event. You might not have physically received the money yet, but for tax purposes, the event is locked in. So, be mindful of your settlement timeline.
The “how much is capital gains tax?” query can feel overwhelming. But the best defence is a solid understanding of the fundamentals. Whether you’re a creative professional selling a portfolio of artwork or an entrepreneur diversifying your assets, aligning your strategy with CGT rules can save you thousands. Here are key takeaways:
• Remember that CGT is influenced by your marginal tax rates. The higher your income bracket, the more you’ll want to reduce gains via valid discounts or asset planning.
• Keep meticulous records. Missing a legitimate expense in your cost base could inflate your capital gain.
• Don’t forget that capital losses carry forward indefinitely—an important strategy for smoothing out gains over the long run.
• Consider timing your sales—delaying a sale until you’ve held the asset for at least 12 months often results in a valuable discount.
• Use professional advice early. Even if you can handle some aspects yourself, an Australian chartered accountant experienced with creative businesses (like ours!) can ensure you aren’t missing out on any potential deductions or deferrals.
If you need support or have questions, please contact us at Amplify 11
While some personal tax rate brackets are being reduced from July 2024 onward, there’s no direct change to how capital gains are calculated. Your net capital gain is still added to your income and taxed at your marginal rate. If your marginal rate is lower because of the new reforms, you could pay less overall tax on your gains, but the CGT calculation steps remain the same.
If you’ve rented part of your main home or used it for business, you might lose a portion of that exemption. Generally, the ATO looks at how long you lived in it as your principal home and how large the rental area was. You may need to pay partial CGT on the fraction of the property used for income generation. Always keep detailed records regarding dates and amounts of rental use.
The rules regarding foreign and temporary residents have tightened. If you’re not an Australian resident for tax purposes for the entire ownership period of the asset—or if certain conditions changed after 8 May 2012—you might not be eligible for the full 50% discount. You could lose part or all of the discount, depending on your specific circumstances.
Inherited assets can maintain the original purchase date if passed through a deceased estate, which might preserve eligibility for older cost bases or even pre-1985 exemptions. However, you’ll need to confirm the “date of acquisition” and whether the asset was already subject to capital gains tax in the estate. In some cases, the asset’s cost base resets.
Yes, improvements often form part of what’s called the “cost base.” For instance, a kitchen renovation that increases your property’s value would typically expand your acquisition cost and reduce your eventual capital gain. Keep receipts, especially for significant capital improvements, as these can markedly reduce the profit figure that’s taxable.
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