CGT Questions

[Nyden]

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

 

[son of baglimit]

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

 

[Nyden]

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

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

 

[carmo]

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?

 

[deftfear]

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

 

[noident]

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.

 

[Santob]

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.

 

[noident]

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.

 

[Santob]

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.

 

[Santob]

Re: CGT question

ah, ok

 

[YELNATS]

Re: CGT question

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.

 

[chewy]

Re: CGT question

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).

 

[chewy]

Re: CGT question

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

 

[Santob]

Re: CGT question

Yes both Chewy and Yelnats are correct in their corrections

 

[GreatPig]

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

 

[rowes]

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 )

 

[meganut]

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?

 

[Hyperion]

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

 

[captluthra]

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

 

[reece55]

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

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