When To Pay & When Not To Pay
So, how do you pay capital gains tax and when? Though it may sound like it is a separate tax, capital gains are part of your taxable income. When you file your income tax assessment at the end of the financial year, if you have net capital gains then you will need to pay your capital gains tax.
When shouldn't you pay capital gains tax? When you have a net capital loss. The net capital loss cannot offset taxes on other income, however, and if you want to carry it forward it can only be used to offset capital gains in future financial years.
There are events and assets which are exempt from CGT. You can find a full list of exemptions on the ATO's website, but it includes selling assets you acquired before CGT was created in September of 1985 or selling your personal car. You don't need to pay capital gains on a property if it is your principal residence. But if you sell real estate, such as rental properties, you will be due to pay capital gains tax.
So, there is no capital gains tax on a primary residence. But there is capital gains tax on property you hold outside your principal residence. Business premises, rental properties, vacant land, holiday homes, etc. are all taxable Australian real property.
How do you calculate how much CGT you will pay? It's simple. When you sell an asset, just subtract the selling price from the original purchase cost. The remainder is your gain or loss. The original purchase cost includes legal fees and stamp duties.
