How to Calculate Capital Gains in Australia

The Australian Taxation Office (ATO) assesses a capital gains tax (CGT) on any asset that is disposed of at a profit, but there is a long list of specific exemptions and rollover provisions. The primary exemption involves your personal home, and others include many events for which disposition would ordinarily involve taking a loss. Australia assesses capital gains tax for qualifying events at the normal income tax rate.

Instructions

Difficulty: Moderate

Determine If You Are Required to Pay Capital Gains Tax in Australia

1. Keep exact, complete contemporaneous records of transactions, including both gains and losses, that may be subject to capital gains tax. Such transactions are termed CGT events by the ATO.
2. Make a worksheet or spreadsheet table of your CGT events that occurred during the tax year. Include the date you acquired your interest in each property, the date you disposed of it and the amount of the purchase and disposition transactions.
3. Exclude transactions that are exempted by the ATO from capital gains taxation, such as those involving your primary residence, pre-CGT assets acquired before 20 September 1985 or events involving assets that normally depreciate in value, including automobiles, personal use items and inexpensive collectibles.

Calculate Your Australia Capital Gains Tax

4. Download the guide to the Australia capital gains tax at the ATO website and use it to calculate your gain or loss for each CGT event that occurred during your tax year (see Resources below). There are separate guides for individuals, businesses and individuals whose only CGT events involved investment shares or units.
5. Read the guide carefully, including its five pages of exemptions and rollover events and three different methods for calculating capital gains, so that you will pay all taxes due and take advantage of your capital losses for the current year.
6. Total the gains and losses from your CGT events during the year and enter the net total at line 17 of the tax return for individuals (line 9 of the tax return for retirees). Your net capital gain is the total of your capital gains for the year, less your total capital losses for the year and any unapplied net capital losses from earlier income years, less any CGT discount and small business CGT concessions to which you are entitled.

Tips & Warnings

• Don't wait until tax time to calculate the capital gains tax liabilities associated with a major transaction. Consult with a tax professional or use the ATO's online calculator tools so that you understand the tax consequences of a transaction before you make the deal. Set aside the transaction proceeds you will use to pay any capital gains tax that you owe, and verify the deadline for making that payment.