Did you know how capital gains tax works, how to calculate CGT, and how you lodge and pay tax on capital gains when you dispose of assets? To know everything about capital gains tax, read this blog.
Capital gains tax is the tax that you need to pay on profits from selling assets, including investments, such as shares, property, and crypto assets. Although it is known as capital gains tax, it belongs to your income tax.
If you sell assets (basically when you are no longer the owner of an asset), a CGT event may occur. This is when you must lodge capital gains and capital losses in your income tax return. If you have a:
You will have two options, either use a calculator to calculate capital gains tax or calculate CGT yourself. The following steps are followed to calculate CGT:
This is your capital proceeds. It is what you get when you dispose of the asset or another CGT event occurs to it. If you give an asset or sell it to your friend for less than it’s worth, your capital proceeds are the asset’s market value.
This is your cost base. This is what it costs you to receive the asset, plus other costs you had to obtain, hold, and sell the asset. If you had a loss on the asset, you need to check the loss amount by using the reduced cost base. On the other hand, if you had a gain on the asset and obtained it prior to 21 September 1999, you can index the cost of inflation up to the date.
Now that you know the steps to calculate capital gains tax. However, many people find it difficult to calculate CGT. Therefore, you can rely on Reliable Melbourne Accountants as we will get it done for you.
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