Capital gains tax calculator – CGT calculator
The Capital Gains Tax (CGT) is a tax that applies in Australia when you sell an asset, stocks or investment at a profit. CGT only applies to investment property – the family home is generally exempt from CGT unless it has been leased, used for the operation of a business or on more than two hectares of land.
How to use our capital gains tax calculator
Your mortgage capital gains tax calculator can help you get an estimate of the CGT you may have to pay when you sell your investment property.
For this tool to work, you must first indicate whether you have owned the asset for more than 12 months. If you have owned the property for more than 12 months, a 50% CGT discount automatically applies.
You then need to enter the price you bought your property for and the price you sold it for.
Finally, you need to enter your current taxable income (your income before paying taxes). You can also enter the costs you incurred for buying and selling the property, but this is an optional step.
Then the calculator will estimate the capital gain based on the buy and sell price you entered. This amount is then added to your current taxable income. From there, the calculator will estimate your CGT to pay.
Here is an example of how it works:
- You have owned your investment property for five years, the automatic discount of 50% CGT therefore applies
- You bought your investment property for $ 550,000
- You sold your investment property for $ 600,000
- Your current taxable income is $ 95,000
- Your capital gain (profit) is $ 50,000
- Your taxable capital gain is $ 25,000 (with the 50% reduction in CGT applied)
- Your capital gains tax payable is estimated at $ 9,750
What is a capital gain?
A capital gain is the profit you get from an investment.
For example, you buy a house for $ 450,000. Five years later, you sell it for $ 520,000. Your capital gain is $ 70,000.
What is capital gains tax?
Capital gains tax is the tax you pay on profits from the sale of an asset, such as investment property.
Capital gains tax is not a separate tax – it’s actually part of your income tax because the capital gains you realize are added to your taxable income in the year you sell the property. This is why our calculator asks you for your taxable income.
CGT must be declared to the Australian Taxation Office (ATO) and it must be paid when filing your tax return during the year of sale of the property.
Can I be exempt from capital gains tax?
There are several cases where you can be exempt from paying CGT.
If you realize a capital loss (you sell your property at a lower price than you originally bought it for), you do not have to pay the CGT because you have not realized a gain in capital. capital.
You also do not have to pay the CGT on your main place of residence (PPOR). Your property will be qualified as PPOR if it meets the following conditions:
- You and your family reside there Personal effects are inside the property
- This is the address to which your mail is delivered
- This is the address you use on the voters list
- Services such as gas, telephone and electricity are connected to it
A special rule applies when you convert your main residence into a rental property. In this case, you will still be exempt from paying the CGT when you sell the property within six years of being let. However, this will only be the case if you did not own another primary residence during the rental period of the property.
The six year rule is reset when you reoccupy the property as your primary residence.
It is important to note that when your primary residence is also your primary establishment, you will be charged CGT for the portion of the property that is set aside to generate income.
How to minimize the capital gains tax?
The best way to minimize your CGT is to be organized and keep accurate records so that you can claim more in your cost base. Any capital costs you incur would be added to your cost base, which will significantly reduce taxable capital gains.
You can also minimize your CGT by retaining ownership of the asset for 12 months. This will automatically give you a 50% discount.
What is a capital loss?
A capital loss occurs when you sell an asset or investment for less than what you bought it for, after taking into account your base price (asset maintenance costs).
If you realize a capital loss, you will not be charged any tax because you have not made a profit. The good thing here is that the losses can be offset by capital gains. Net capital losses in a taxation year can be carried forward indefinitely. However, these losses cannot be deducted from your income.
To illustrate this: Suppose you suffered a capital loss of $ 20,000 last year. This year, you successfully recorded a capital gain of $ 25,000 on the sale of your property. When calculating your taxes this year, only $ 5,000 will be billed with the CGT.
In view of this advantage, you must make sure to keep all the relevant documents that would prove your capital loss in previous years.