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Capital Gains Tax - How do you offset ?

Offsetting Capital Gains Tax (CGT)


CGT is a tax levied on a capital gain arising from the sale of a growth oriented asset such as property or shares.

In effect, any realised capital gain is added to your assessable income and taxed at your marginal tax rate (MTR).


1.     Use a capital loss to offset your tax liability


If an investment is sold at a loss pre 30 June, the capital loss can be offset against a realised capital gain from another investment to reduce the level of capital gain assessable for tax and hence; the level of CGT payable.


2.     Defer selling an asset to a subsequent financial year



If you anticipate your income reducing to a lower tax bracket in the next financial year, it may be tax effective to defer disposing of an asset that is profitable until then. This should result in less CGT payable on the realised gain.


3.     Hold an investment for a period of at least 12 months


If you hold an investment for more than 12 months, you are generally eligible for a 50% discount on a realised capital gain. Companies are not entitled to the discount. The discounted capital gain will be included in your assessable income and taxed at your marginal tax rate (MTR).


For superannuation assets, there is generally a 33% discount on a realised capital gain if the investment is held for the same period of time. The maximum CGT payable by a superannuation fund is 10%.


4.     Choose the right ownership structure for your investment


When purchasing an investment asset, you should ensure that the ownership structure of the investment is correct as different structures have different CGT implications for a profitable investment when realised.


5.     Carry forward capital losses to minimise CGT



If a capital loss was not offset against a capital gain previously, it may be carried forward in a subsequent financial year and can potentially reduce or mitigate the effect of any future CGT payable.  


Source  :  Caunt and Lowbeer


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