If you’ve sold something valuable recently — a rental property, shares, even a bit of crypto — there’s a good chance the ATO is expecting a slice of your profits. That’s where Capital Gains Tax (CGT) steps in.
As a Small Business Accountant Hobart locals rely on, we’ve been fielding a lot of CGT questions lately. So, let’s break it down — simply, clearly, and without the financial fluff.
💰 What Is Capital Gains Tax?
Capital Gains Tax isn’t a separate tax — it’s part of your income tax. It kicks in when you sell (or otherwise dispose of) a capital asset, and the sale price is higher than what you paid for it (including improvements and associated costs).
Assets that typically trigger CGT include:
- Investment properties
- Shares
- Managed funds
- Cryptocurrency
- Business goodwill and assets
- Collectables worth more than $500
🧮 How Is CGT Calculated?
Your capital gain is generally:
Sale Price – Cost Base = Capital Gain
The Cost Base includes:
- Purchase price
- Stamp duty
- Legal fees
- Agent’s fees
- Costs of improvements
Hold the asset for 12 months or more, and you may qualify for the 50% CGT discount if you’re an individual (not a company).
🏠 What About the Main Residence Exemption?
If you’ve sold your family home, the good news is it’s usually exempt from CGT — provided:
✅ It was your main residence for the entire period of ownership
✅ It wasn’t used to produce income (e.g. renting out all or part of it)
However, if you rent out your home or subdivide the land, things can get complicated. The ATO has flagged this as an area of increasing interest.
👩💼 CGT for Small Business Owners
Selling a business (or part of it)? You may be eligible for small business CGT concessions — including:
- The 15-year exemption
- 50% active asset reduction
- Retirement exemption
- Rollover concession
These can dramatically reduce or even eliminate your CGT bill, but strict eligibility rules apply.
📅 Timing Can Save You Thousands
Holding an asset just one day past 12 months can get you that 50% discount.
Selling just before the end of financial year might push your tax bill up — or down — depending on your total income.
🧾 Keep Those Records!
No matter what you sell, good record keeping is essential. You’ll need to hang onto:
- Purchase and sale contracts
- Receipts for improvements or expenses
- Valuation records (if applicable)
The ATO requires you to keep CGT-related records for five years after the relevant event.
👀 The ATO Is Watching…
They are currently paying close attention to:
✅ Cryptocurrency transactions
✅ Subdivided land sales
✅ Inherited assets
✅ Mismatched reporting between sellers and agents
They’re also cross-matching property data with your tax return — so now’s not the time to play hide-and-seek with your tax obligations.
✅ Want to Make Smarter Decisions?
Capital Gains Tax can be tricky — and it’s easy to get it wrong. If you’re thinking about selling, already have, or just want to plan ahead, chat with Hills Accounting. A little bit of advice now can save you a lot of tax later.
🔗 Useful Link:
ATO CGT Overview
Remember, this article is general in nature and doesn’t take into account your specific objectives, financial situation, or needs. For advice tailored to your circumstances, have a chat with us at Hills Accounting Hobart.
Talk to Kathy and the team today and stay ahead with Hills Insights.
Call Now! 03 6273 7800, or email admin@hillsaccounting.com.au.