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The Biggest Traps With Capital Gains

Before you start investing, we highly recommend you understand the tax consequences of investing. Countless times will we see clients unexpectedly get tax bills because they were not aware of the consequences of their investments. Here are 3 key points to think about before you invest:

  1. Timing – this one is crucial for investment properties in particular. The day you enter into a contract is the day the capital gains event occurs. It does not matter if the settlement is months after the contract date. If you know you want the capital gains to occur in a specific financial year when you sell investment properties, make sure you make the contract date within that financial year.
  2. Holding assets – If you hold a capital gains asset for over 12 months, then you are entitled to a 50% discount on your capital gain. This may affect your decision making with selling capital gains assets. Please note that this does not apply for companies that have investment assets, as they are subject to a different set of rules.
  3. Declaring Losses – The ATO knows when you buy and sell CGT assets, and will immediately flag you if they believe you should be declaring a capital gains event. Even if you sell a CGT asset at a loss, you will need to declare that to the ATO in your tax return. It’s also a good idea to declare this as any losses can be carried forward to offset future gains you may make.

If you have sold a capital gains asset, and would like to better prepare yourself for upcoming tax return, please get in contact with us. We offer tax planning to ensure you are prepared for your tax return and are aware of your potential tax outcome.