Archive for the ‘Capital Gains Tax’ Category

Selling shares: how does tax apply?

Wednesday, November 13th, 2019

Whether you own just a few listed shares or have an extensive portfolio, understanding how capital gains tax (CGT) applies when you sell your shares can help you plan your trades effectively. If you trade shares on a scale that amounts to a business of share trading, talk to your tax adviser about the different tax regime that applies.
Each time you sell a parcel of shares, you trigger a “CGT event” and you must work out whether you’ve made a capital gain on that parcel (where the proceeds you receive exceed the cost base) or capital loss (where the cost base exceeds the proceeds). You also trigger a CGT event if you give the shares away as a gift – perhaps to a family member. For tax purposes, you’re deemed to have disposed of the shares at their full market value.
All of your capital gains for the income year are tallied and reduced by any capital losses. This includes your gains and losses from all of your assets that year, not just shares. If you have an overall “net capital gain”, this is included in your assessable income and taxed at your marginal tax rate. If you have a “net capital loss”, you can’t offset this against ordinary income like salary or rental income. Instead, a net capital loss can be carried forward to future years to apply against future capital gains.

Small business CGT concessions: when do I qualify?

Monday, November 11th, 2019

CGT concessions allow you to reduce – or in some cases, completely eliminate – the capital gain from the sale of a business asset, whether it’s held directly by your business entity or in another related structure.
What’s more, the concessions also allow you to make extra super contributions – sometimes up to $1,515,000 – in connection with the sale of business assets. This is an attractive opportunity for many small business owners heading for retirement, especially given the restrictive annual contributions caps that usually apply.
There are various concessions available, each with their own eligibility rules. There are two basic conditions you must meet before you can access any of the concessions. The first requirement tests whether your business is “small” enough to qualify. There are two alternative tests: a turnover test and a net assets test. The second major requirement is that the capital gain must arise from the sale (or other CGT event) of an “active” asset.

Issues for businesses

Monday, June 24th, 2019

Lower company tax rate

From 1 July 2016, the income tax rate applicable to qualifying companies has reduced to 27.5%. For the year ending 30 June 2019, this lower tax rate now applies for companies with aggregated turnover of up to $50 million, as long as they satisfy the “passive income test”.

Small business restructure rollover relief

Small businesses (<$10 million turnover threshold) have access to the small business restructure relief, which allows eligible taxpayers to transfer assets between related entities, including companies, trusts and individuals, without any income tax or CGT consequences. While this rollover can be very beneficial to a small business, and can lead to substantial tax savings, the eligibility rules can be complex, so care is needed.

Super guarantee contributions
The rate for super contributions paid by employers on behalf of their employees under the super guarantee for the year ended 30 June 2019 is 9.5%.
If you’re an employer, you must make super guarantee contributions for your employees quarterly, within 28 days after the end of each quarter (September, December, March and June).
TIP: Although the June 2019 quarter super guarantee contribution doesn’t have to be paid until 28 July 2018, it’s worth considering an early payment – you can only claim deductions on this year’s return for contributions that employees’ super funds receive by 30 June 2019.

Guidance on when a company carries on a business

Wednesday, May 8th, 2019

With reduced company tax rates available for some businesses in recent years, and changes in eligibility for capital gains tax (CGT) small business concessions, it’s become increasingly important for us to understand how the law and the ATO deal with concepts like “small business entity” and “carrying on a business”.
New guidance is now available on the types of factors the ATO considers when deciding whether a company “carries on a business in a general sense”, and how the scope and nature of the business come into play when the ATO determines the tax consequences of a company’s activities and transactions.
The guidance emphasises that it’s not possible to definitively state whether a company is carrying on a business, but it’s a question of fact that the ATO must decide on a case-by-case basis by looking at a range of indicators across the company’s features and activities. One key indicator is whether the company’s activities have the purpose of making a profit. The ATO accepts that where a profit-making purpose exists, it’s likely the other indicators will support a conclusion that the company carries on a business.

Property used for storage an active asset for small business CGT concession purposes

Wednesday, April 17th, 2019

The Administrative Appeals Tribunal (AAT) has decided that a property a small business owner used to store materials, tools and other equipment was an active asset for the purpose of the small business capital gains tax (CGT) concessions.
The taxpayer carried on a business of building, bricklaying and paving through a family trust. He owned a block of land used to store work tools, equipment and materials, and to park work vehicles and trailers. There was no business signage on the property.
After the property was sold in October 2016, the ATO issued a private ruling that the taxpayer was not entitled to apply the small business CGT concessions to the capital gain because the property was not an “active business asset”.
However, the AAT concluded that the business use of the land was far from minimal, and more than incidental to carrying on the business. This meant the CGT concessions could be applied.

Reviewing the tax treatment of granny flats

Friday, February 1st, 2019

The Federal Government has asked the Board of Taxation to undertake a review of the tax treatment of “granny flat” arrangements, recommending potential changes that take into account the interactions between tax laws and the social security rules. This request for review is in response to the 2017 Australian Law Reform Commission’s report Elder abuse: a national legal response.
Currently, homeowners may have to pay capital gains tax (CGT) where there is a formal agreement, for example, for an older parent to live with their child, either in the same dwelling or a separate granny flat. This may deter families from establishing a formal and legally enforceable agreement, leaving no protection of the rights of the older person if there is a breakdown in the informal agreement.

CGT on grant of easement or licence

Tuesday, December 4th, 2018

Taxation Determination TD 2018/15, issued on 31 October 2018, considers the capital gains tax (CGT) consequences of granting an easement, profit à prendre or licence over an asset.
In the ATO’s view, CGT event D1 (creating contractual or other rights) rather than CGT event A1 (disposing of an asset) happens when any of the following rights are granted over an asset:
• an easement, other than one arising by operation of the law;
• a right to enter and remove a product or part of the soil from a taxpayer’s land (a profit à prendre); or
• a licence (which does not confer the exclusive right to possess the land).

Tax on compensation received for inappropriate advice

Monday, November 12th, 2018

On the heels of the banking and financial services Royal Commission, the ATO has published information about how tax applies for people who receive compensation from a financial institution that provided inappropriate advice and/or did not provide advice it should have. This can include compensation for the loss of an investment, or a refund of fees or interest.
Capital gains tax comes into play, and the compensation amount may count as part of your assessable income if it’s a refund of adviser fees that you’ve already claimed as a tax deduction.
TIP: Contact us if you’ve received compensation from your bank or adviser and need to know more.

Cyptocurrency and tax: updated guidelines

Tuesday, October 2nd, 2018

The ATO says that for taxpayers carrying on businesses that involve transacting with cryptocurrency, the trading stock rules apply, rather than the capital gains tax (CGT) rules.
The ATO’s guidelines on the tax treatment of cryptocurrencies have recently been updated, following feedback from community consultation earlier this year.
The ATO received about 800 pieces of individual feedback and submissions, and has now provided additional guidance on the practical issues of exchanging one cryptocurrency for another, and the related recordkeeping requirements.

Transacting with cryptocurrency: updated ATO info

Thursday, August 2nd, 2018

The ATO says a capital gains tax (CGT) event occurs when a person disposes of their cryptocurrency (eg Bitcoin). A disposal can occur when someone:
• sells or gifts cryptocurrency;
• trades or exchanges cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency) – if the cryptocurrency received cannot be valued, the capital proceeds from the disposal are worked out by using the market value of the cryptocurrency disposed of at the time of the transaction;
• converts cryptocurrency to fiat currency like Australian dollars; or
• uses cryptocurrency to obtain goods or services.
If you need assistance with the tax treatment of cryptocurrency, or the ATO’s record-keeping requirements for taxpayers who are involved in acquiring or disposing of cryptocurrency, please contact our office.


  Liability limited by a scheme approved under Professional Standards Legislation.