# CGT Questions



## Nyden (23 May 2007)

Hello all, I'm clearly new here! First post,

Alright, my question is as follows - when selling shares that were given to me, is my capital gains tax counted towards the entire share value, or rather - any profit those shares have since accumulated since becoming mine?

Is this complicated by the fact that the shares were 'officially' intended for me? These shares were formally my fathers, however the a/c section was my name (ie, Bob Smith <A/C Tim Smith>; these names are fake, by the way : )

Basically, the shares were purchased for me in my childhood, I've been dabbling in the market with my own money as of late, don't really like the lack of movement in these shares, & wish to sell and put the money into something else, but am fearful of how much will be lost)

Also, does anyone have any recommendations on selling issuer sponsored shares, ideally with minimal brokerage fees?

Regards,
Nyden


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## son of baglimit (23 May 2007)

*Re: CGT Question*

are they still registered under the old name, or were they transferred to be purely under your name ?

old name = still your fathers shares. he paid for them, therefore they're his.

your name only = the price on the day the transfer happened.

see childrens investments in ato.gov.au


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## Nyden (24 May 2007)

*Re: CGT Question*



son of baglimit said:


> are they still registered under the old name, or were they transferred to be purely under your name ?
> 
> old name = still your fathers shares. he paid for them, therefore they're his.
> 
> ...





They were transferred into my name many years ago, guess I wasn't clear about that; I apologise.

Thank you for your reply, so the fact that (prior to them being transferred to me) they were intended for me on the a/c is irrelevant tax wise?

Thank you for the link, by the way.

Regards,
Nyden


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## carmo (2 July 2007)

*CGT Question*

I buy an old jar out of a junk shop for $10, it turns out to be a rare piece of Australian Pottery and sell it for $10,000. Do I have a CGT obligation or is that just a windfall?


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## deftfear (2 July 2007)

*Re: CGT Question*

Here is are a few paragraphs frm the ATO website carmo http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/026&mfp=001&mnu=5060#001_002_026

Collectables 
Collectables include the following items that are used or kept mainly for the personal use or enjoyment of you or your associate(s): 

paintings, sculptures, drawings, engravings or photographs; reproductions of these items or property of a similar description or use 
jewellery 
antiques 
coins or medallions 
rare folios, manuscripts or books, and 
postage stamps or first day covers. 
A collectable is also: 

an interest in any of those items 
a debt that arises from any of those items, or 
an option or right to acquire any of those items. 
You disregard any capital gain or capital loss you make from a collectable if any of the following apply:

you acquired the collectable for $500 or less 
you acquired an interest in the collectable for $500 or less before 16 December 1995, or 
you acquired an interest in the collectable when it had a market value of $500 or less
If you dispose of collectables individually that you would usually dispose of as a set, you are exempt from paying CGT only if you acquired the set for $500 or less. This does not apply to collectables you acquired before 16 December 1995. 

Capital losses from collectables can be used only to reduce capital gains (including future capital gains) from collectables


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## noident (20 February 2008)

*CGT Question*

Hi!
This is probably a dumb question but I have to ask.
How is CGT deducted - is it pay-as-you-go (e.g. a broker automatically deducts 30% off your gain (if you happen to make one) when you sell shares), or is it calculated and deducted once at the end of financial year?
I hope it's not PAYG because this way if I have $1000 and I buy and sell 6 times - 3 times with a $300 gain and 3 times with $300 loss I would end up with $1000 - $300 * 0.3 * 3 = $730 instead of $1000 and the $270 owed to me by the taxman at the end of financial year.
Thanks in advance.


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## Santob (20 February 2008)

*Re: CGT question*

CGT calculations are made at the time you lodge your tax. No broker would get involved in taking out amounts to pay CGT - nor is CGT part of the PAYE deductions you might get from your employer say.

And also, your calulcations are way off the mark, I think you need a bit more help with understanding CGT, and its best to get professional advice or to refer to the Australian Taxation Office website here

But based on on what you wrote: If you've started with $1000 in capital, and made those gains and losses, your net position is no capital gain, so there is no capital gain added to your total income (including all other incomes such as salary and bank interest) and you then pay the rate of tax that your total income falls into (so not just a flat 30%)

However you do have options to roll forward capital losses, whereas capital gains must be added to income in the year they occur, and then there is an added complication that if the gain is made on an investment held for less than one year, then the full gain is taxable, whereas if held for more than one year you have the option of discounting the gains..

But again..get some official advise as any or all of what i've written above may not apply to your circumstances.


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## noident (20 February 2008)

*Re: CGT question*

Hi Santob,
Thanks for your reply.
You've answered my question - it's not PAYG, I suspected that but needed to be sure.
Thank you.


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## Santob (20 February 2008)

*Re: CGT question*

I'll give you a really simple example (and please correct me if I'm wrong) that assumes you earn a salary, don't have any other tax boligations or other sources of income..

If you earn the average annual income of $50,000, then according to the tax calculator from the ATO here you'll pay $10,350 in tax.

Now lets say you invest $5,000 in shares, and after 6months you sell those shares for $5,500. your Capital gain in this instance is $500. That capital gain is added to your total income.

So your total income for the year is now $50,500. And the tax you'll pay goes up to $10,500. 

If the opposite happens and after 6 months you sell the shares for $4,500, then your capital gain (rather its a capital loss) is -$500 and your total income is now $49,500 for which you'll pay $10,200 in tax.

If both of those events happened, and you made $500 in one sale and lost $500 in another sale, then your total capital gain is zero, and your total income remains as $50,000.


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## Santob (20 February 2008)

*Re: CGT question*

ah, ok


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## YELNATS (20 February 2008)

*Re: CGT question*



Santob said:


> If the opposite happens and after 6 months you sell the shares for $4,500, then your capital gain (rather its a capital loss) is -$500 and your total income is now $49,500 for which you'll pay $10,200 in tax.




Hi, I doubt this part of your explanation is correct. 

My understanding is that in any year if you have capital losses and no capital gains to offset them against, then you are only able to carry forward these capital losses to offset any capital gains in future years.

Therefore, in your example, taxable income remains at $50,000.

If I'm wrong, please let me know.


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## chewy (20 February 2008)

*Re: CGT question*



Santob said:


> If the opposite happens and after 6 months you sell the shares for $4,500, then your capital gain (rather its a capital loss) is -$500 and your total income is now $49,500 for which you'll pay $10,200 in tax.




I could well be wrong but I was of the impression that you cannot offset capital loss against income - but only against capital gains. So if you had a $500 capital loss one year you can't use that to reduce your income by $500. However you can carry that loss over for as long as you like until one year when you clock up a capital gain - then you can offset the loss against the gain (e.g. if you sell of shares one year for a $500 capital gain - you can reduce that to $0 for tax purposes with your carried forward $500 loss from a previous year).


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## chewy (20 February 2008)

*Re: CGT question*

ahh Yelnats beat me to it by one minute  but yeah thats the way I understand it too


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## Santob (20 February 2008)

*Re: CGT question*

Yes both Chewy and Yelnats are correct in their corrections


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## GreatPig (20 February 2008)

*Re: CGT question*

If you make a big enough profit in one year, you will enter the PAYG system for the next financial year, whereby you'll have to pay some tax quarterly (or possibly annually, depending on exactly how much it is). You do this yourself though, not the broker.

GP


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## rowes (20 February 2008)

*Re: CGT question*

yes i also agree with chewy and yelnats, however.... 

sit down and have a good chat with your accountant. my accountant told me that you cant (not sposed to) offset your capital losses against your regular income but it is a bit of a grey area and there are ways around things. i have only used him for advice so far and not to do my tax but this year pherhaps i will. he's been trading markets for years so guess he does know what he's talking about (i hope )


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## meganut (28 February 2008)

*CGT Question*

Can someone tell me, if I have a CGT event, does it affect my income tax or is tax paid only on the event and is separate from income... let me explain, if I make 50k in one year and have a CGT event of 10k, then my understanding is that I pay PAYG tax on my income and CGT on the 10k.

Therefore if I make a Capital Gain I was under the impression that any profits from a capital gain did not affect things like child support... is this true, as I sold an investment property a few years back and made a sizeable profit and it did not affect my income and therefore my child support payments were not effected. Or have I got it all wrong?

Is there someone in the know that can put me on the right track?


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## Hyperion (28 February 2008)

*Re: Another CGT Question relating to CSA*

Capital Gains Tax is part of income tax.

Capital gains are included as part of your assessable income and thus flow through to your taxable income.

Taxable income = Assessable income - Allowable deductions


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## captluthra (29 April 2008)

*Re: VRE - View Resources*

Hi Guys,

I am new to Australia. Moved in from NY. Could some one please tell me as to what are the tax implications of losses made on stocks transactions.

If I lost $30000, then could that amount be written off?

Any help would be highly appreciated.

Sanjeev


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## reece55 (29 April 2008)

*Re: VRE - View Resources*



captluthra said:


> Hi Guys,
> 
> I am new to Australia. Moved in from NY. Could some one please tell me as to what are the tax implications of losses made on stocks transactions.
> 
> ...




Sanjeev
In Australia, a loss made on the sale of shares is referred to as a capital loss. Capital losses may be offset against other capital gains (such a profit on the sale of shares or property), but if you have a net capital loss for the year, this loss cannot be applied against your personal income and is retained as a capital loss to be offset against future capital gains. Hope this explains the issue.

Cheers


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## grand (1 May 2009)

*CGT Question*

I sold an investment property in August 2007 which I purchased in August 1998. Before doing this I asked my account to estimate the CGT which was reasonable.

While doing my Tax return for 2007-2008 the accountant now tells me that he forgot to add back the Depreciation that I have claimed over the years which means I am up for an additonal $8,000 in tax. He said there was a new ruling in 1997. Does any know if this is correct?

Thanks


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## beamstas (1 May 2009)

*Re: CGT Question*



grand said:


> I sold an investment property in August 2007 which I purchased in August 1998. Before doing this I asked my account to estimate the CGT which was reasonable.
> 
> While doing my Tax return for 2007-2008 the accountant now tells me that he forgot to add back the Depreciation that I have claimed over the years which means I am up for an additonal $8,000 in tax. He said there was a new ruling in 1997. Does any know if this is correct?
> 
> Thanks





I'll talk to my boss about it on Tuesday
Never heard of anything like this before in my life

Please explain how you have "claimed" depreciation on your property?



Cheers
Brad


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## stoxclimber (2 May 2009)

*Re: CGT Question*

Expenses that you have deducted to offset income in a given financial year cannot be included in the cost base of the asset.


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## hardcoremike (5 August 2010)

*Quick Question on CGT*

Hi,
I'm about to do my tax and upon checking my broker statements, I realise the settlement date is in July 2010. If the trade was in FY09/10 and the settlement date is in FY10/11, which FY should I record the capital gain/loss?

Thanks.


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## cutz (5 August 2010)

*Re: Quick Question on CGT*



hardcoremike said:


> Hi,
> I'm about to do my tax and upon checking my broker statements, I realise the settlement date is in July 2010. If the trade was in FY09/10 and the settlement date is in FY10/11, which FY should I record the capital gain/loss?
> 
> Thanks.




Hi Mike,

I use the trade date.

But that said check with your accountant at tax return time.


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## donteatme (2 March 2011)

*CGT Question*

Hello

I am thinking about going as an investor, instead of a trader, so I can get the 50% off CGT after 1 year.

My issue is, let's say I am holding a particular stock since Jan 2011, I then buy more of that same stock in Feb 2011, then in March 2011, only sell the stock that I bought in Feb 2011. 

Would that original stock purchased in Jan 2011 be good to go for the discount in Jan 2012?

I am using Bell Direct, and it adjusted my average price after I bought bought some extra shares and sold them.

Just would like some clarification on this from the veterans please


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## So_Cynical (2 March 2011)

*Re: CGT Question*

We have been over this a few times...pretty much everything you can think of share and tax related has been discussed at length already.

https://www.aussiestockforums.com/forums/showthread.php?t=15463
https://www.aussiestockforums.com/forums/showthread.php?t=14225
https://www.aussiestockforums.com/forums/showthread.php?t=6115


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## donteatme (3 March 2011)

Thanks for that. Looks like I can select which ones I sold:

"If you have the relevant records (for example, share certificates), you may be able to identify which particular shares or units you have disposed of. *In other cases, the Commissioner will accept your selection of the identity of shares disposed of.*"

Excellent 

I like this idea of yours Cynical.

"Buy 10000 XYZ @ 1.00 each = 10k
sell 8000 XYZ @ 1.12 each = 9K

Leaving 2000 XYZ @ 0.50 each ( 50 cents free carry approx) as a longer term hold, at
least that's the way ive been looking at it...and working fine so far."

How has it been working out for you?


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## So_Cynical (3 March 2011)

donteatme said:


> I like this idea of yours Cynical.
> 
> "Buy 10000 XYZ @ 1.00 each = 10k
> sell 8000 XYZ @ 1.12 each = 9K
> ...




Overall i reckon its a good long term strategy, it very much suits my mentality and risk comfort level...im low cost averaging and my strategy starts with the low cost (low share price) entry, though it would probably work just as well with trending stocks if you got the right one.

I can highly recommend having some sort of portfolio software (that allows parcel selling) as it is a big help in keeping track of what you paid for all your share parcels, it gets pretty complicated once you get to 23 stocks and maybe 50 parcels like im at now.


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## jank (28 October 2011)

For CGT are there any detuctables one can charge against it?

E.g.
Buy Shares valued @ $10,000 
24 months later sell all shares @ $20,000

$10,000 profit
Shares held for more than 1 year so 50% discount on CGT
so $5,000 added as income for the next tax year.

So far am I right?

So then what if there were expenses for acquiring this profit, such as brokerage fees, subscriptions to investors magazines, books, websites, interest from banks if capital came from a loan etc... Can these be off-set against the profit?


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## bellenuit (28 October 2011)

jank said:


> For CGT are there any detuctables one can charge against it?
> 
> E.g.
> Buy Shares valued @ $10,000
> ...




Brokerage fees are usually netted against the buying and selling prices. So if $10 to buy and $20 to sell, you would calculate your gain as $19,980 - $10,010 = $9,970. (you are correct in saying you only add 50% of the gain to your income if held for 1 year+)

If you borrowed to buy the shares, the interest paid will be deductible, but depends on the nature of the shares.  If they are dividend paying shares and you bought them as an income producing asset, then you would write off the interest paid in each tax year for the duration you held the asset under "interest and dividend deductions". If they don't pay dividends, then you should add the total interest paid to your cost base when calculating the capital gain.

Note: anything added to your cost base for calculating CGT is done before you apply the 50% discount where applicable, so the 50% only applies to the "final" net gain.

The treatment of interest above is a bit of a generalisation and other factors may effect how it should be treated such as whether your are deemed to be a tax trader or not (there are whole threads on that discussion).

Some of the other expenses you listed may be tax deductible if you can show that they are needed to produce income. They would most likely be treated as income deductions in your tax return (for the year the expense was incurred) rather than added to the cost base for CGT calculations.

This is a complex area so you should get tax advice if you are unsure.


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## MACCA350 (29 October 2011)

Just remember that capital losses must be applied to capital gains PRIOR to applying any 50% discount.

Calculate capital gains held less than 12mths, apply any current year(first then previous year) losses against this first. 
Calculate capital gains held more than 12mths, apply any remaining losses against this BEFORE applying the 50% discount.

You can choose which gains to apply losses to first(CG held less than 12mths or CG held more than 12mths) but applying as described above results in the lowest tax liability.

This rule really sucks as I believe if we have held onto a stock for more than 12mths the discount should be locked in and losses should be applied after the 50% discount, after all we took the risk so we should have that discount guaranteed......damn ATO

Btw don't take my word, seek professional advice.

EDIT: just noticed Bellenuit noted this.

Cheers


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