Buying or Selling Shares? Understand the Capital Gains Tax on Share Investments
Author │ Renil Nair – MAS Tax Accountants Springfield Central
Are you currently investing or considering to invest in shares? When it comes to buying or selling investment shares, it is important to be aware of the tax implications and your tax responsibilities. This includes the capital gains tax on share investments, and how it could affect the overall tax position.
Dealing in shares can involve Capital Gains Tax (CGT), so it is best to speak with your Accountant about possible tax issues. If you invest or buy shares, the difference between the buying and selling price is your capital gain or loss.
The tax you pay on your capital depends on several things, such as how long you have owned the asset or shares, your marginal rate, and whether there are any capital losses you can offset your gains against. When the assets or shares are held for more than 12 months, the capital gain tax is generally discounted by 50%, meaning that you may pay less tax.
If you make a capital loss on shares, you can use it to reduce a capital gain in the same income year. If the capital loss is greater than the capital gain or if you make capital loss in a financial year during which you do not make any capital gain, the loss during the year could be carried forward and could be deducted against the capital gain in future years.
The Australian Taxation Office (ATO) outlines three ways of calculating the capital gain and you can choose any of these methods that gives you the smallest capital gain. These include:
- CGT Discount Method: For assets held for 12 months or more before the relevant CGT event.
- Indexation Method: For assets acquired before 21 September 1999; or held for 12 months or more before the relevant CGT event.
- Other Method: For assets held for less than 12 months before the relevant CGT event.
For more information on how to calculate your capital gain, please speak with your Accountant or visit the ATO website.
For personalised advice and to find out how CGT could affect your investment shares, please speak with your Tax Accountant. The experts at MAS Tax Accountants Springfield Central can assist you to understand and manage your tax responsibilities, as well as prepare and lodge your returns.