Other Tax Considerations

Capital gains tax

Generally, capital gains and losses do not apply to assets acquired before 20 September 1985. (Pre CGT) A capital profit made on a capital gains asset acquired after 19 September 1985 will be assessed as capital gain.

Selling investment assets (such as shares, property or managed fund investments) is a common way to make a capital gain or capital loss. Generally, a capital gain (or capital loss) is the difference between what it cost you to obtain and keep an investment asset and what you received when you disposed of it.

Capital gains tax (CGT) is the tax you pay on your net capital gain. It isn’t a separate tax, just part of your income tax.

If you make a capital loss when you dispose of an asset, you can use it to reduce any capital gain you made in the same financial year. If you have not made a capital gain in the same financial year, you can use the loss to reduce a capital gain in a later year. You cannot deduct capital losses or a net capital loss from other income.

You may be able to reduce your capital gain if:

  • you have owned your shares for at least 12 months, or
  • you gifted them to a deductible gift recipient, provided they are valued at less than $5,000 and you acquired them at least 12 months earlier.

Foreign investments

If you are an Australian resident with overseas assets you need to include any capital gains or capital losses you make on those assets in your tax return.

Additionally, if you have interests in a foreign company, a foreign trust or a foreign life insurance policy, you may have to include income you receive from these interests in your tax return.

If you receive foreign income that is taxable in Australia and you paid foreign tax on that income, you may be entitled to an Australian foreign income tax offset.

Negative gearing

Where the interest on borrowings used to purchase an investment is greater than the investment income after all other deductions, the investment is negatively geared.  The loss on the investment is included in your personal tax return to offset your salary or other income. If the loss is greater than your total taxable income, you may carry forward the loss to the next year.

Pay As You Go (PAYG) Instalments

If you make a profit from renting your property, you will need to know about the PAYG instalments system.

This is a system for paying instalments towards your expected tax liability for an income year. You will generally be required to pay PAYG instalments if you earn $2,000 or more of business or investment income, such as rental income, and the debt on your income tax assessment is more than $500.

If you are required to pay PAYG instalments we will notify you. You will usually be required to pay the instalments at the end of each quarter.

There are usually two options if you pay quarterly instalments:

  • pay using an instalment amount or an instalment rate calculated by the ATO
  • pay an instalment amount or using an instalment rate you work out yourself.