Capital Gains Tax (CGT)

Key points relating to Capital Gains Tax in Australia:

• CGT Event: This is the trigger for calculating and potentially paying CGT. It occurs when you sell or dispose of a capital asset.
• Capital Gain: The difference between the sale price of an asset and its original cost price.
• Capital Loss: The difference between the sale price of an asset and its original cost price, when the sale price is lower. Capital losses can generally be offset against capital gains to reduce your overall CGT liability.

Capital Gains Tax discounts and concessions:

Good news! The Australian government offers several concessions specifically for small businesses to help reduce their CGT burden. These include:

• General 50% CGT Discount: Applies to individuals, sole traders, and some trusts that have held the asset for more than 12 months. This halves your capital gain for tax purposes.
• Small Business CGT Concessions: There are four specific concessions available to eligible small businesses:
  • 15-year Exemption: Assets owned for more than 15 years may be exempt from CGT entirely.
  • 50% Active Asset Reduction: Reduce your capital gain on active business assets (like equipment) by 50% (in addition to the general discount).
  • Retirement Exemption: Up to $500,000 of capital gain from selling a business asset can be exempt if certain conditions are met.
  • Rollover: Defer paying CGT by reinvesting the proceeds from selling an asset into a replacement asset.

Resources:

• Australian Taxation Office (ATO): Small business CGT concessions: https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/income-and-deductions-for-business/concessions-offsets-and-rebates/small-business-cgt-concessions
• Business.gov.au: Capital gains tax for business: https://business.gov.au/finance/taxation/capital-gains-tax-for-business