Capital gains at end of financial year

The end of financial year is a good time to think about your capital gains and losses for the year.

Timing and planning are everything when it comes to minimising your CGT bill and making the most out of your investment returns.

Capital gains tax (CGT) is incurred when a taxpayer disposes of an asset, for example, commercial and residential property, shares, units in unit trusts or collectables. If the asset sells for a price that is higher than the purchase price, the difference is considered to be a capital gain. Where an asset is sold at a loss (for a smaller amount than it was originally purchased), a capital loss is incurred. Capital losses can be used to offset capital gains in a financial year. It is also possible for taxpayers to carry capital losses forward to subsequent years if they do not have capital gains against which they can deduct them at the time.

Here are some strategies to reduce your CGT liability:

Dispose of poorly performing assets before the end of financial year

In years where you have incurred a significant capital gain, you may care to consider disposing of another asset that will yield a capital loss.

In the event that an underperforming asset will not have a positive turn around, disposing of it before the end of financial year will allow you to use the capital loss to offset your tax liability from any capital gains.

Defer disposal to a lower-income year

Instead of disposing of an asset that you expect to make a capital gain on this year, you may care to consider postponing the disposal if you expect to have a lower taxable income next year. For example, you may be planning to take some unpaid leave or have disposed of multiple assets in the current year.

Plan for CGT events in advance

If you are planning on making any new investments or disposing of assets, it always pays to plan your CGT strategy in advance. Careless timing can cost you a huge amount on your tax bill.

Carry forward your capital losses

You can carry forward capital losses from previous years to offset capital gains in the current year. The real offset value of capital losses diminishes, so if you have incurred a significant capital loss you may care to consider bringing forward the sale of an asset that you expect to make a capital gain on.

Our accountants are here and ready to help with any questions you may have regarding capital gains.

Call (02) 4926 2300 or email us.

If you would like to discuss capital gains at end of financial year please do not hesitate to give the team at Leenane Templeton a call.