Introduction to Capital Gains Tax

For capital gains tax to apply to a sale in Australia, a CGT Event must happen to a CGT Asset. The most common event is a sale, and the most common assets include real estate and shares.

Capital gains and losses can be made by individuals, companies and trusts.

History of Capital Gains Tax in Australia

Capital gains tax in Australia applies when a profit is made on the disposal of a capital asset that was acquired after 20 September 1985. Capital assets are defined in the legislation to be "any kind of property" or "a legal or equitable right that is not property."

There are some disposals that will be subject to CGT exemptions, the most common of these being the main residence exemption.

The total gain of a taxpayer is the total profit made from the sale of an asset. The total profit is obtained by subtracting the cost base from the capital proceeds.

Once the total gain has been worked out, the net gain is worked out by applying any capital losses, then applying the CGT discount if applicable.

After calculating net capital gain, the taxpayer who disposed of the property includes the net capital gain in his or her assessable income when their tax returns are lodged.