Capital gains tax
- Thread starter freja
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Hi and welcome freja 
That is a very general question and so unless you provide some more info or paint a scenario I think you'll be lucky to get a reply that answers any specific situation you have in mind.
I'm not a tax adviser so broadly speaking you pay tax on the nett capital gain you make in the financial year. The nett capital gain is basically the taxable profits you make minus any capital losses in that year or carried forward from previous years. If you held a parcel of shares for less than 1 year then the whole capital gain is taxable. If you held the parcel for more than 1 year then only 50% of the capital gain is taxable.
Imo, the best path to take is take anything you read in here as a guide (unless of course you know the poster is a tax adviser) and then look at the ATO's website where there is heaps of information and/or speak to your own tax adviser.
Good luck.
bullmarket
That is a very general question and so unless you provide some more info or paint a scenario I think you'll be lucky to get a reply that answers any specific situation you have in mind.
I'm not a tax adviser so broadly speaking you pay tax on the nett capital gain you make in the financial year. The nett capital gain is basically the taxable profits you make minus any capital losses in that year or carried forward from previous years. If you held a parcel of shares for less than 1 year then the whole capital gain is taxable. If you held the parcel for more than 1 year then only 50% of the capital gain is taxable.
Imo, the best path to take is take anything you read in here as a guide (unless of course you know the poster is a tax adviser) and then look at the ATO's website where there is heaps of information and/or speak to your own tax adviser.
Good luck.
bullmarket
Thanks. I guess I was confused about after one year to 50% if that stays the same after subsequent years. Anyway, I will do the homework and find out- sorry to be so general.
I'm on a very low income in the NEIS program (=same amount as dole!) but I've been putting money away each week and every six weeks I buy the min 500 shares in a company. I go for a newly floated company worth a dollar a share and I plan to have 10-20 such companies in two years. So far I have two and am coming up to my third (trying not to laugh but it's true) I reckon if half the companies do as well as my first company in two years I can sell and retain my initial outlay - then start again but at 5000 a holding instead of the measly 500... but only having 4 select companies to invest in, And just slowly go from there.
None of it worries me because I put away money that I save from not going out etc and only up to 5000 saved then all else is win money. It's fun as it's no risk for me, it's money I could have easily wasted on crap.
I'm on a very low income in the NEIS program (=same amount as dole!) but I've been putting money away each week and every six weeks I buy the min 500 shares in a company. I go for a newly floated company worth a dollar a share and I plan to have 10-20 such companies in two years. So far I have two and am coming up to my third (trying not to laugh but it's true) I reckon if half the companies do as well as my first company in two years I can sell and retain my initial outlay - then start again but at 5000 a holding instead of the measly 500... but only having 4 select companies to invest in, And just slowly go from there.
None of it worries me because I put away money that I save from not going out etc and only up to 5000 saved then all else is win money. It's fun as it's no risk for me, it's money I could have easily wasted on crap.
Julia
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Hi Frejafreja said:
That's a terrific effort on such a low income. Good for you and congratulations on your planning and determination.
Julia
If you can it might be worthwhile speaking to an accountant/financial planner in 12 months or so as to what the best option is. If you business gets going and you start earning a good income then you could pay a higher percentage in tax on your gains. For example:
In 12 months your business is just starting and your
highest marginal tax rate: 30%
initial investment value: $10,000
current investment value: $30,000
if you sold all of your investments (assuming you'd held all of them for 12 months) you would possibly be liable for something like this:
Capital gain: $30,000 - $10,000 = $20,000
CGT Discount: $20,000 * 50% = $10,000
Tax Liability: $10,000 * 30% = $3,000
Net gain: $20,000 - $3,000 = $17,000
If however in two years your business was doing really well but your investments were at the same value:
highest marginal tax rate: 48.5%
initial investment value: $10,000
current investment value: $30,000
Capital Gain: $30,000 - $10,000 = $20,000
CGT Discount: $20,000 * 50% = $10,000
Tax Liability: $10,000 * 48.5% = $4,850
Net gain: $20,000 - $4,850 = $15,150
I've painted a bit of a doom and gloom scenario in taking the highest tax rate and assuming that your investments didn't grow in the latter 12 months, but it hopefully highlights how a change in your income can affect the amount of tax you pay on the investments you are buying now (over 12% difference in this example). Hence why if you reasonably expect an increase in your income over the period it would be worthwhile speaking to a professional to assess the best course of action to legally minimise the tax you have to pay.
Hope that gives you something to think about.
In 12 months your business is just starting and your
highest marginal tax rate: 30%
initial investment value: $10,000
current investment value: $30,000
if you sold all of your investments (assuming you'd held all of them for 12 months) you would possibly be liable for something like this:
Capital gain: $30,000 - $10,000 = $20,000
CGT Discount: $20,000 * 50% = $10,000
Tax Liability: $10,000 * 30% = $3,000
Net gain: $20,000 - $3,000 = $17,000
If however in two years your business was doing really well but your investments were at the same value:
highest marginal tax rate: 48.5%
initial investment value: $10,000
current investment value: $30,000
Capital Gain: $30,000 - $10,000 = $20,000
CGT Discount: $20,000 * 50% = $10,000
Tax Liability: $10,000 * 48.5% = $4,850
Net gain: $20,000 - $4,850 = $15,150
I've painted a bit of a doom and gloom scenario in taking the highest tax rate and assuming that your investments didn't grow in the latter 12 months, but it hopefully highlights how a change in your income can affect the amount of tax you pay on the investments you are buying now (over 12% difference in this example). Hence why if you reasonably expect an increase in your income over the period it would be worthwhile speaking to a professional to assess the best course of action to legally minimise the tax you have to pay.
Hope that gives you something to think about.
smrt-guy, woah that is an interesting prospect and exactly what I wonder about when it comes to projections. But at this stage I will concentrate on my plan and be patient with so little to play.
Thanks for putting up those figures, I will copy & paste and put it aside for contemplation.
Thanks for putting up those figures, I will copy & paste and put it aside for contemplation.
