What is capital gains tax and what rate of tax do you pay?
Note: New terms
We may use some terms that are not familiar to you. These words are printed in red in the paper document the first time they are used and are explained in Explanation of terms.
While we have used the word 'bought' rather than 'acquired' in our examples, you may have acquired your shares or units without paying for them (for example, as a gift or through an inheritance or through the demutualisation of an insurance company such as the NRMA or a demerger such as the demerger of BHP Steel Limited). If you acquired shares or units in any of these ways you may be subject to CGT when you sell them.
Similarly, we refer to 'selling' shares or units when you may have disposed of them in some other way (for example, giving them away or transferring them to someone else). All of these disposals are CGT events.
Reminder
You need to keep good records of any assets you have bought or sold so you can correctly work out the amount of capital gain or capital loss you have made when a CGT event happens. You must keep these records for five years after the CGT event has happened or after you claim any capital loss from that event against future capital gains.
You need to keep good records of any assets you have bought or sold so you can correctly work out the amount of capital gain or capital loss you have made when a CGT event happens. You must keep these records for five years after the CGT event has happened or after you claim any capital loss from that event against future capital gains.
Capital gains tax (CGT) refers to the tax you pay on any capital gain you make (for example, from the sale of a CGT asset) that you include on your annual income tax return. There is no separate tax on capital gains, it is merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate. Your net capital gain is the difference between your total capital gains for the year and your total capital losses (including capital losses from earlier years), less any CGT discount to which you are entitled.
When you sell an asset, this transaction is known as a CGT event. You can make a capital gain or capital loss if a CGT event happens or you receive a distribution of a capital gain from a managed fund. You show the total of your current year capital gains at H item 17 on your 2003 tax return for individuals (supplementary section), or at H item 9 if you use the 2003 tax return for retirees. (Note: You cannot use the tax return for retirees if you had a distribution from a managed fund during the year.) You show your net capital gain at A item 17 on your tax return, or at A item 9 if you use the tax return for retirees.
This guide only covers capital gains or capital losses from CGT assets that are shares, units or other interests in managed funds.