How To Avoid Capital Gains Tax in Australia
Selling an asset? You’re probably wondering how to avoid Capital Gains Tax in Australia. While not always possible, there are a few key ways to reduce or avoid Capital Gains Tax depending on your specific circumstances. Discover legal ways to avoid Capital Gains Tax with our Capital Gains Tax expert advice.
What Is Capital Gains Tax?
First, let’s do a quick breakdown of what Capital Gains Tax (CGT) is and what it means for the average Australian. Put simply, it’s a tax on the capital gain or profit you make from selling assets. When you sell an asset and make a profit you must declare that profit which will then be taxed as part of your income tax.
When most of us think of CGT, our minds turn to property. While CGT certainly does apply to profits you make from selling property, it also applies to profits made from selling shares, investments, inherited assets, business assets, cryptocurrency, units in a trust, and other types of assets. It doesn’t just apply to full sales either. CGT is also in play for partial sales, buying out business partners, and many other circumstances and scenarios.
This is where getting Capital Gains Tax expert advice can be helpful, It allows you to fully understand which asset profits you will and won’t need to pay CGT on.
Ways to Avoid Capital Gains Tax in Australia
Before we dive into the ways you can avoid Capital Gains Tax, there are a few assets that are automatically exempt. Generally speaking, profit from the sale of personal vehicles, your main residence (which has never been used to produce income), depreciating assets in an investment property, and any assets you acquired before the 20th of September, 1985, will not be taxed.
For everything else, here are a few ways to avoid Capital Gains Tax or at least minimise it.
Offset Your Gains With Losses
CGT isn’t applied as a separate tax but as part of your income tax. This means that you can offset it, just as you do with expenses. Keep detailed records of everything you spent to upkeep, add to, or maintain your asset and declare those expenses. You can also make the most of a low earning year by selling an asset during that financial year to save on your overall income tax and CGT.
Avoid Quick Flips
One tactic is to hold onto your assets for over a year. If you retain an investment for over 12 months you could reduce CGT by 50%. This doesn’t apply to everything, for example, companies are required to pay full CGT and Self Managed Super Funds are only entitled to a 33.3% discount. Consult an expert to see if CGT on your assets would receive the full 50% reduction.
Be Aware of CGT Concessions
Selling a business asset? There may be a concession out there just for you. For small businesses specifically, there are a range of concessions and exemptions that you could qualify for. Consult an expert to understand the full range of concessions and exemptions to determine whether you’re eligible.
Speak To An Expert
There are many ways to minimise or avoid Capital Gains Tax, all of which apply to specific circumstances and require their own set of eligibility criteria. To discover how you can save on CGT when selling your assets, discuss your options with our financial advisors and accountants for Capital Gains Tax expert advice.
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