Capital Gains Tax: What You Need to Know

Capital gains tax (CGT) is a tax that applies to the increase in value of certain assets that you own or dispose of. CGT was introduced in Australia in 1985 and applies to any asset you have acquired since then, unless it is specifically exempted.
Some examples of assets that are subject to CGT are:

  • Shares
  • Property
  • Collectibles
  • Business assets
  • Crypto assets
  • If you invest in any of these assets, you need to be aware of the tax implications of your transactions and how to report them correctly. At MDB Taxation and Business Advisors, we are here to help you with all your CGT needs. We are your trusted tax agents and experts in preparing individual tax returns for all types of investors.

How does CGT apply to your assets?

The Australian Taxation Office (ATO) has issued official guidance stating that any asset that is not held for personal use or enjoyment is taxed as a capital gains asset, which means you have to pay tax every time you trade, sell or use the asset to pay for goods or services.

You will make a capital gain or loss when you dispose of your asset, depending on the difference between the cost base and the capital proceeds. The cost base is the amount you paid to acquire the asset, plus any incidental costs. The capital proceeds are the amount you received or are entitled to receive from the disposal.
To work out your capital gain or loss, you need to keep records of your transactions, such as dates, amounts, values, and purposes. You also need to convert the value of your assets into Australian dollars at the time of each transaction.

You can use our online calculator and record keeping tool to help you with this process. You can also access the tool and save your data through ATO online services.

How can you reduce your CGT on your assets?

There are some ways that you can reduce your CGT liability on your assets, such as:

  • Claiming the CGT discount: If you hold your asset for at least 12 months before disposing of it, you may be eligible for a 50% discount on your capital gain. This means that only half of your gain will be included in your assessable income.
  • Claiming the main residence exemption: If you sell a property that was your main residence and you used some of the proceeds to acquire another asset, you may be eligible for a full or partial exemption from CGT on both the property and the other asset.
  • Claiming rollover relief: If you dispose of one asset and acquire another one within a certain period of time, you may be able to defer paying CGT on the first asset until you dispose of the second one.
  • Claiming personal use asset exemption: If you acquire an asset for personal use or enjoyment, such as a painting or a bicycle, and the cost is less than $10,000, you may be exempt from CGT on that asset.

At MDB Taxation and Business Advisors, we can help you determine if you are eligible for any of these concessions and how to claim them correctly.

Book an appointment with us today!

How does CGT apply to crypto assets?

Crypto assets are a special type of asset that are subject to CGT rules. Crypto assets are digital tokens that use encryption techniques to secure transactions and generate new units. Some examples of crypto assets are Bitcoin, Ethereum, Litecoin, and Dogecoin.

If you invest in crypto assets, you need to pay tax every time you trade, sell or use crypto to pay for goods or services . This also applies if you receive new crypto assets as a result of a chain split.

The same rules for calculating and reducing your CGT on other assets apply to crypto assets. However, there are some additional factors that you need to consider when dealing with crypto assets, such as:

  • The volatility of crypto prices: Crypto prices can change significantly within a short period of time, which can affect your capital gain or loss. You need to use the market value of your crypto assets at the time of each transaction.
  • The complexity of crypto transactions: Crypto transactions can involve multiple parties, platforms, and currencies, which can make it difficult to track and record them accurately. You need to keep detailed records of all your crypto transactions and use reliable sources of information.
  • The compliance risks of crypto activities: Crypto activities can attract attention from the ATO and other regulatory bodies, which can result in audits, penalties, or legal actions. You need to report your crypto transactions correctly and comply with all relevant laws and regulations.

At MDB Taxation and Business Advisors, we have extensive experience and knowledge in preparing individual tax returns for crypto investors. We can help you with all your crypto tax needs and ensure that you are compliant and optimised.

How can MDB Taxation and Business Advisors help?

At MDB Taxation and Business Advisors, we have extensive experience and knowledge in preparing individual tax returns for all types of investors. We can help you with:

  • Identifying and reporting your transactions and capital gains or losses on all your assets, including crypto assets
  • Calculating and claiming any CGT discounts, exemptions or reliefs on all your assets, including crypto assets
  • Lodging your tax return on time and accurately
  • Dealing with any queries or audits from the ATO

We pride ourselves on our commitment to providing exceptional service to every client. We understand that everyone’s situation is unique, which is why we offer personalised solutions tailored to meet your individual needs.

We also take the stress out of dealing with CGT on your assets by helping you take advantage of any deductions and credits you are entitled to, giving you peace of mind that you are getting the most out of your return. With our assistance, you will have more time to focus on what you do best – growing your investments.

Don’t let the complexity of CGT on your assets hold you back. Contact us today to learn more about how we can help you navigate the world of capital gains tax and make the most of your investment. Trust us to provide you with the guidance and support you need to make informed decisions and reach your full potential.