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.

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, but please keep in mind it's just an estimate.

Finder's capital gains tax calculator

• 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

First you need to state whether you've owned the asset for more than 12 months (a yes or no question). If you've owned the asset for more than 12 months a 50% capital gains tax discount applies.

Then you enter the purchase price (the price you paid for the asset) and then the price you sold it for.

Last, enter your taxable income for the current year. That's your income before tax.

Here's a simple example:

• You've owned an asset for five years (select yes for the first question). The 50% discount now applies.
• You bought the asset for $700,000.
• You sold it for $900,000
• Your taxable income is $85,000 a year.
• Your capital gain (profit) is $200,000.
• Your taxable capital gain with the 50% discount applied is $100,000.
• Your estimated capital gains tax obligation is $37,175.

That's just a simple estimate. You can click "How this calculator works" for more information about the assumptions built into the capital gains tax calculator.

Income tax and capital gains

Capital gains tax is not actually a separate tax charged on top of your income tax. Instead, the capital gain is added to your taxable income. This is why the calculator asks for your taxable income.

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

In the example above, if you just earned $85,000 a year before tax your marginal tax rate is 32.5%. But when you add the $100,000 of taxable capital gains from the asset sale this puts you at $185,000. And that puts you in Australia's highest marginal tax bracket with a rate of 45%.

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.

Calculating your CGT on an investment property

When selling an investment property you are able to deduct the costs of owning and maintaining the property from the sale price. This is called your cost base.

Here's a simple example:

• You purchase an investment property for $350,000 and sell it for $500,000 six years later.
• You paid $20,000 in stamp duty and other costs, and spent $15,000 in renovations to the property. This is added to the purchase price.
• Your cost base is now $385,000. Subtracting this from the sale price gives you a capital gain of $115,000.
• Applying the 50% discount gives you a taxable capital gain of $57,500.

Learn more about CGT when selling property

If you've already claimed tax deductions for expenses related to maintaining and owning your property, you can't deduct these again from your capital gains tax. This is why keeping clear tax records for every year you've owned an asset is so important. These previous deductions need to be subtracted from your cost base.

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.

How does a capital loss affect me?

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 a 33.3% rather 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.

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