Unfortunately, unless you are of a certain age, it is unlikely that you bought all of your assets before the 19th September 1985. If you had, no matter what you sold them for, you wouldn’t have to give Capital Gains Tax a second’s thought. Now that’s out of the way for a small minority of the population, it is time to reflect on some of the issues that selling our items for a gain (or loss) have for the rest of us.
There are three main types of Capital Gain:
- Personal Use Assets
- Other Assets (degree in stating the obvious finally came to some use)
In addition, there are three conditions that must be present for a potential CGT liability to be possible. These are:
- A CGT asset must exist
- It must have been purchased after the date stated above
- A CGT evet such as a sale, loss or destruction must have taken place. There are others but you can chat with your tax accountant if you would like to discuss CGT in more detail
As you can probably guess this includes items such as artwork, jewellery, stamps as well as a number of other items. Along with the three conditions above, there is also a lower limit of $500. If, when you purchased the asset, it cost you less than this lower limit, Capital Gains Tax does not apply and there will be no liability.
Personal Use Assets
As the name suggests these are the items that make up the things you use on a day to day basis and include normal everyday items such as furniture, clothes and electrical goods. However, before you start having to worry about paying CGT if you, under unusual circumstances, sold your favourite jeans for more than you paid for them, there is a minimum limit for what you must have purchased the item for in order for there to be a liability. This limit is $10,000 so unless you are in the habit of buying items of clothes for more than $10,000 each and selling them for more than that, CGT doesn’t apply to you.
Your Other Assets
As the name suggests, these items are those which do not fall into the previous two and can include leases, real estate and share. You need to keep detailed records of these types of asset as they may be subject to CGT.
There are also a number of items which are exempt from CGT such as your main residence, cars & motorcycles, gambling wins and personal injury compensation.
The above is only intended to be a basic introduction to CGT so if you require detailed information in relation to your specific situation please be sure to speak with a tax accountant.