Understanding Capital Gains Tax as a first time investor

As a first-time investor, it’s vital not to overlook the implications of capital gains tax (CGT) before purchasing an asset such as real estate. Thankfully, it’s not always certain that you’ll have to pay CGT if you sell your asset as there are some exemptions that could apply.

Given CGT is such a complex tax, we can’t give you all of the answers, but hope the below may be of assistance as a starting point when you are buying or selling an asset.

 

What is Capital Gains Tax (CGT)?

CGT is a tax that applies to profit you make from selling specific assets. These assets can include property, shares, foreign currency, and leases, to name a few. After you sell an asset, the money you make or lose is called a capital gain or a capital loss respectively. 

When completing your income tax return, you may need to include your capital gains and/or losses.  CGT forms a part of income tax, and, you may need to pay tax on any profit you make from selling your relevant assets. 

 

How much will you need to pay in CGT?

Calculating a CGT liability is a detailed process and you may be better to seek professional advice for your circumstances.

Broadly, any capital gain (profit you make on selling a relevant asset) is added to your overall taxable income. If you have incurred a capital loss, you may be able to offset that loss against any other capital gain. You may also be able to reduce any capital gain by deducting selling costs, property improvement expenses and/or certain other costs.

If you have an asset you are planning to sell, seeking professional advice is recommended.  

 

Are there any exemptions to CGT?

Again, the CGT requirements can be quite complex.  Certain exemptions may apply for your situation, such as you purchased your property before a certain date, or the property is or was your main residence.  Seeking professional advice about your situation is strongly recommended to ensure you don’t fall foul of the law.

 

More information on CGT can be found on the Australian Taxation Office (ATO) website.

 

 

 

 

Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.

You may be also interested in

JoelAnna1

Preparing for the life events, out of your control

For Anna and Joel, it was an important decision to go with a mortgage broker they trusted. For a maj ...

Read Story
GoingOffTheGridTile

Going off the grid

If you're thinking about making the switch to an off the grid home, read our latest blog now. We tal ...

Read Story
HFTile2

Listen to your heart this Heart Week

From 28 April – 4 May is the Heart Foundations, Heart Week which focuses on the importance of having ...

Read Story