Capital gains tax calculator

What is capital gains tax?

Capital gains tax (CGT) applies in Australia when you sell shares, an investment property or other asset at a profit. CGT doesn't apply to most personal property and items, such as your car or family home.

The good news is that when you own an asset for 12 months or longer, you are entitled to a 50% discount off any capital gains tax you owe.

Finder's capital gains tax calculator

You can use Finder's simple capital gains tax calculator to estimate your capital gain (or loss). This will help you understand your CGT obligations. Please keep in mind it's just an estimate.

• How this calculator works

  The capital gains Tax (CGT) is calculated by first determining if there is a capital gain, which is calculated by subtracting the purchase price of the asset, the purchase costs and the sale costs from the sale price of the asset. If there is a capital gain, the individual's total tax payable is then calculated by applying their marginal tax rate for the current financial year to their total taxable income including the capital gain (which may include a discount if held for over 12 months). The figure provided by the calculator relates to the portion of tax payable as a result of the capital gain.

  Assumptions and limitations

  The calculator assumes the following:

  • the individual is a permanent resident of Australia for the entire current financial year
  • the asset:
    • was purchased after 21 September 1991
    • is owned by the individual and not a business entity
    • is not an owner-occupied home
    • is not part of a super fund
    • is not otherwise exempt from the CGT rules
  • the Medicare Levy Surcharge rate is not payable.

   

Disclaimer: The information provided by this calculator is only intended to provide an approximate estimate of the CGT you may need to pay. It is general in nature and does not constitute professional advice. The rules relating to CGT are complex and you should always seek professional advice in relation to your particular circumstances.

How to use the capital gains tax calculator

1. Select whether or not you've owned the asset for more than 12 months. If you've owned the asset for more than 12 months a 50% capital gains tax discount applies, effectively halving your tax payable.

2. Enter the purchase price (the price you paid for the asset) and then the price you sold it for.

3. Enter your taxable income for the current year. That's your income before tax.

Income tax and capital gains

Capital gains tax is added to your taxable income. It's not a separate tax charged on top of your income tax. This is why the calculator asks for your taxable income.

This means that a large capital gain can push you into a higher tax bracket.

In the example above, if you earned $85,000 a year before tax your marginal tax rate would be 30%. But when you add the $100,000 of taxable capital gains from the asset sale, this puts your income at $185,000. That puts you in the $135,001 to $190,000 tax bracket, with a marginal rate of 37%.

Luckily, if the asset you're selling is an investment property you can reduce your capital gains tax further by subtracting certain costs. More on that below.

How do you calculate capital gains tax on an investment property?

When selling an investment property you're able to deduct the costs of buying the property which weren't deductible on your annual tax return, like stamp duty and renovations. The total of your purchase price plus expenses you haven't deducted before is called your cost base.

You can continue to claim ownership expenses on your tax return in that financial year as well, such as mortgage interest payments. You'll need to declare rental income too.

As you can see, CGT and property tax can be complicated, which is why keeping clear tax records for every year you've owned an asset is so important.

For a full explanation and guide on calculating CGT on your investment property, head to the link below.

Learn more about CGT when selling property

Our expert says: Speak to a tax professional

"There's a lot to know about capital gains tax, from understanding whether or not you are entitled to a discount, keeping the right records and whether or not your super fund is involved. Make sure you keep records of everything, read our other guides on CGT and, importantly, speak to a registered tax professional."

Rebecca Pike

Editor, Money

How does a capital loss affect you?

It's also possible to make a capital loss. This is where you sell the asset for less than you paid for it, after your costs to maintain the asset are taken into consideration. With a capital loss you obviously don't have to pay any capital gains tax because there is no profit.

There is an upside though. You can use a capital loss to offset future capital gains. Let's say you sold an asset for $20,000 less than the cost base three years ago. Then this year you sold another asset for a capital gain of $50,000. You can subtract the $20,000 loss from the gain and reduce your capital gain to $30,000.

There is no time limit on when you can use a capital loss to offset a gain. But you need to have detailed records to show you have made a capital loss in order to claim it.

How is CGT calculated for shares and super?

When a super fund sells an investment asset and makes a capital gain it is liable for capital gains tax. But this doesn't directly affect an ordinary person with a super fund. The fund itself takes care of this.

Self-managed super funds (SMSFs) also have to pay CGT. As with property, if you own an asset through an SMSF for more than 12 months there is a discount. With super the discount is 33.3% rather than 50%.

Capital gains tax also comes into effect when you sell shares. It works the same as with property. There's a 50% discount if you owned the shares for more than 12 months before disposing of them. If you make a capital loss you can use it to reduce future capital gains.

Frequently asked questions about calculating capital gains tax

• How can you reduce your capital gains tax?

  There are 2 ways to approach a CGT reduction. You can try to reduce your CGT bill on the asset itself or you can try to minimise your overall taxable income (since your capital gain is simply added to your overall taxable income).

  Here are some tips:

  • • Do you qualify for an exemption? Remember that you don't have to pay capital gains tax on your home. You can only claim this "principal place of residence" exemption on one place at a time.
    • Can you increase your cost base? The more you spend to maintain the property, the less CGT you pay. You subtract your cost base from the selling price when you determine your capital gain. Obviously you don't want to spend more on the property just to reduce your tax bill. But you should definitely keep detailed records of every single property cost that you can add into your cost base (for example, your stamp duty and legal costs to purchase the property are part of your cost base).
    • Hold the asset for 12 months. If the asset in question is an investment property, waiting at least 12 months before selling is a no-brainer. You will get a 50% discount on your CGT.
    • Time the sale. If you know that your income will be lower next financial year, it might be worth timing the sale of the asset when your income is lowest, thereby reducing your total taxable income.
    • Get an accountant. Above all, get expert help from a tax professional.

• What is the 6 year rule for CGT?

  Your main residence is exempt from CGT. If you move out of your own home and turn it into an investment property, and you then sell that property, you'll need to pay CGT on part of the profit – for the period that the property was producing an income.

  However, for CGT purposes, you can continue treating a property as your main residence for up to 6 years if you used it to produce a rental income, known as the '6-year rule'; and indefinitely if you didn't rent it out or produce income.

  During that 6-year period, you can't treat any other property as your main residence, except for a 6 month transitional period if you are moving house.

Written by

Richard Whitten

Senior Money Editor

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Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

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Sarah is the author of How to Raise Rich Kids. With over 20 years of experience in property, finance and investment journalism, she is a trusted expert whose insights regularly appear across television, radio and print media, including Sunrise, Channel 7 News, Bloomberg and Yahoo! Finance. She has previously served as managing editor for Your Investment Property and Australian Broker. Her expert advice has been shared in the media over 4,000 times. Sarah holds a Bachelor’s degree in Communications and a Tier 1 Generic Knowledge certification, which complies with ASIC standards. See full bio

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