Capital gains tax (CGT) is a part of income tax that applies when capital gains are realized on assets acquired after September 19, 1985. The most common event triggering CGT is selling or gifting an asset. CGT also applies to other events like transferring assets to a trust or company.
Assets subject to CGT (called CGT assets) include real estate, shares, collectibles, equipment, and contractual rights. Exceptions apply for some personal use assets like cars. Special CGT rules can also apply to certain assets like leases and options.
A capital gain arises when the sale price (capital proceeds) exceeds the cost basis.
A capital loss occurs when the cost basis exceeds the capital proceeds. Net capital gains are included in assessable income. For individuals, trusts, and super funds owning assets for 12+ months, the CGT discount reduces capital gains by 50% (or 33% for super funds). Companies cannot access the discount but can use indexation to reduce gains. Capital losses can only offset capital gains, not other income. Unused losses carry forward.
Exemptions, rollovers, and concessions also apply in certain cases. Small business entities can access additional concessions for CGT assets used in business. Foreign residents and temporary residents have special CGT rules. Withholding may apply when foreign residents sell Australian real estate.
