What is Capital Gain Tax?

Australia's capital gains tax (CGT) is a tax imposed on the profits or gains acquired from the sale of an asset, such as stocks or real estate. Share trading is one of the most accessible and popular forms of investment in Australia, and it’s important for traders to understand how capital gains tax works to make informed investment decisions.

When it comes to share trading, the CGT liability arises when you sell the shares for a price that is higher than the purchase price. This profit is known as a capital gain, which is added to your taxable income for the financial year and taxed at your marginal tax rate.

However, the CGT liability can be reduced or eliminated depending on various factors such as the length of time the shares were held, and whether the shares were held in a trust or a company. If you held the shares for more than 12 months, you may be eligible for a CGT discount of up to 50% which means you only pay tax on 50% of the capital gain.

It's also important to note that if you sell any shares during the financial year, you will need to include all the details of the sale in your tax return, regardless of whether or not you made a profit. If you’re not sure how to calculate your CGT liability, it’s best to seek the advice of an experienced accountant or tax agent.

Additionally, if you have made a loss on the sale of shares, you may be able to use that loss to offset any capital gains you have made in the same financial year or to carry forward the loss to future years. This process is known as capital loss harvesting and may be a useful strategy for managing your tax liabilities.

Understanding Australia’s capital gains tax laws may seem daunting, but it’s important for all share traders to be aware of the tax implications of their investments. At Bryan and Co. Accounting, we can help you navigate the complexities of CGT when it comes to share trading. Contact us today to learn more about our expert accounting and taxation services.