Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is the tax that you pay on any capital gain. It's not a separate tax, just part of your income tax.
The most common way of making a capital gain or loss is by selling assets, such as property or vehicles, which is a CGT event. Examples of a CGT event are when:
- you sell or give away an asset to someone else
- an asset you own is lost or destroyed
- shares you own are cancelled, surrendered or redeemed
- you stop being an Australian resident
- a company makes a payment (not a dividend to you as a shareholder).
If your home is a place of business, your business might have capital gains tax implications when you sell it.
Small business CGT concessions
There are four small business CGT concessions that can be used to reduce your capital gain on business assets. So long as you meet certain conditions, you can apply for as many concessions as you're entitled to until the capital gain is reduced to nil.
The four CGT concessions are:
Small business 15-year exemption
No assessable capital gain when selling a business asset that has been owned for 15 years and you're aged 55 years or over and are retiring. Also applies if you're permanently incapacitated.
Small business 50% active asset reduction
Reduce your capital gain on a business (active) asset by 50%.
Small business retirement exemption
A capital gain from the sale of a business asset will be exempt up to a lifetime limit of $500,000. If you're under the age of 55, you must pay the exempt amount into a complying superannuation fund or retirement savings account.
Small business roll-over
Defer you capital gain on a small business asset for a year. Under this method, you don't include the gain in your income until a change in circumstances causes a CGT event to happen which 'crystallises' the gain. For example, you don't buy a replacement asset within the required time or you sell the replacement asset.