Updated: Apr 28, 2021
The purchase of shares, property, cryptocurrency and other assets is subject to capital gains tax (CGT). If you purchase the asset at a one price, and sell it for another price, the difference between the price of purchase and sale will amount to your capital gain or capital loss.
Capital gain: selling an investment for more than the cost than you acquired it.
Capital loss: selling an investment for less than the cost to acquire it.
Factors influencing CGT
The amount of CGT that you will pay is contingent upon your marginal tax rate and whether you have made any capital losses.
Marginal Tax Rate
The Australian Tax Office specifies the marginal individual income tax rates for 2020-21 as follows:
Capital gains and losses form part of your income tax and therefore must be reported at tax time. Tax on investment income will be applied at your marginal tax rate.
Investments held for more than 12 months are only taxed at 50% of the capital gain. This is referred to as the CGT discount.
It is imperative to factor in CGT when making investment decisions as any asset held for under 12 months will be taxed at a higher rate at the time of sale. Consider whether the gain you stand to make by selling your asset within 12 months will be substantial in consideration of the tax it will be subject to.