Australian Capital Gains Tax

A capital gain is a term used worldwide to refer to the profits accrued from the economic transactions conducted by an entrepreneur. In this case therefore, capital gains tax is clearly defined as the tax charged on any well documented and declared gains made from a registered business venture. Australia like any other country in the world has to tax its citizens and any other persons transacting profitable business within the borders of Australia. The Australian tax rules apply indiscriminately to all its citizens whether living in or out of the country.

The Australian government calculates its citizens' capital gains tax by summing up a business's capital gains and subtracting its capital losses if any. The business is at liberty to subtract any other gains such as tax concessions and discounts in case it is entitled to the same. This tax is applicable to any sale of property within Australia be they foreign or locally owned. By including foreign owned property or business we are referring to any running business or parcels of land or real estates that may belong to non Australian citizens but are registered or operate within Australia.

Capital gains tax exemptions

As much as the government must tax its citizens, there are specific cases that may not be taxable. The most prominent of them all is gains made from the sale of a person's residence. Such income is not taxable under Australian capital gains tax. There may however be situations that may force this type of property to fall under taxable gains. This is for instance if the residence must have been put up for rent to a different tenant other than the owner. The other scenario in which capital gains tax may not be applicable is when the property in question or asset was acquired before the 20th of September 1985 as the government does not charge any capital gains tax on such assets.

Computation of Australian capital gains tax

Just like in many other countries across the world, the Australian capital gains tax is computed by determining the selling price and subtracting the costs of buying the property together with any additional; base costs. These costs may include commissions paid to the sales agents among other expenses that may have been incurred in the process of carrying out the transaction. If the balance proves that there was a capital gain, then that difference will be taxed according to the prevailing capital gains tax rates.