How to minimise your CGT this financial year
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If you’re filing your tax return through a tax agent, you have until 15 May next year (for the 2019 financial year) — here are a few ideas to talk over with your accountant.
Each and every year, investors seemingly forget to take into account the full weight of Capital Gains Tax when they start to do the numbers on how they did in the year.
Capital Gains Tax is triggered when you make a profit on any share sale you may conduct during the year, and is generally taxed at your marginal tax rate — as it’s added to your assessable income for the year.
But, there are a few ways you can help minimise CGT for the last financial year — and in the years to come (providing the laws don’t change!)
1. Hold an asset for at least 12 months
You are usually able to claim a 50 per cent discount on asset sales if you hold it for more than 12 months — something people always seemingly forget.
2. Keep your receipts
This one is like holy scripture for accountants, and for good reason.
For share trading, the receipts could relate to things like home office expenses as well as loan documents, if you’ve borrowed money to invest.
3. Offset your gains with a capital loss or two
If you’ve ended up making a capital gain during the year, consider selling poor performing assets that will realise a capital loss before the end of the financial year.
This will offset your tax liability from any capital gains made throughout the year.
4. Live in your property
This one’s for investors who dabble in real estate as well as the market (we find there’s a big degree of crossover here).
The tax office deems your primary residence to be exempt from CGT, so if you rented out the house and then move back in, you’ll only be stung by CGT for the time you didn’t live in the house during the financial year.
5. Revalue your property before renting it out
This is super important if the property was your permanent place of residence for any significant time before you rented it out.
The difference between final sale price and property value at the time it was rented, is used to calculate the capital gain.
However, if you didn’t have your property valued at the time of putting it up for rent, the original purchase price will be used. You can avoid paying unnecessary tax by having the property valued prior to renting it out!
6. Always, always, always talk to a professional tax agent
This is probably the best advice we can give you.
CGT can be quite complicated when you don’t know exactly what you’re entitled to. Speak to a professional who can advise you and guide you through the process.
Liz Russell is senior tax manager at Australia’s largest online tax agent, etax.com.au, Australia’s largest online tax return service.
Liz has been with Etax since it launched in 1998 and brings more than 40 years’ tax experience to the table. Her expertise lies within complex individual tax returns and ensuring all of her clients walk away with the best possible refund while staying within ATO rules and regulations.