If you sell your different types of capital asset, such as real estate or shares, you can make a profit or loss for a particular capital. This cost describes acquiring the asset and disposing of the asset.
You must report capital gains and losses in your income tax return when you lodge in the financial year and pay tax on your capital gains, it doesn’t matter if you made gains or losses. It’s called Capital gain Tax (CGT) and this is the part of your income tax, you don’t need to lodged separate in your return.
If you sell your capital asset and you make profit on it, this gain will be added to your assessable income and may increase your tax liability. Tax withheld for capital gains is a different thing so you may need to calculate how much money you own and cover the relevant amount in your return.
If you sell your capital assets in this situation you make a loss on it, you can reduce your liability against it.
All assets you don’t need to pay tax on it, If you purchase your assets before 20 September 1985. So, all assets you have acquired since tax on capital gains.
- Personal assets are exempt from CGT, including your home, car, furniture etc.
- If you use solely for taxable purposes like business equipment or some fittings in rental property, so CGT doesn’t apply on depreciating assets.
You need to keep in mind that you made capital gain or losses must you enter into contact for dispose of assets rather than settle your assets. So if you sign a contract of sale for any investment property in July 2017 and settle in September 2017, you need to report gain or losses to ATO through 2016-17 tax return in the financial year.
If you are Australian resident, CGT will apply to your worldwide income. However, If you are Foreign resident for tax purposes and you made gain or loss, CGT will apply on assets that are ‘taxable Australian property’.