How much CGT?

[Beeper]

Hi Guys and Girls, new here..

just need to run a scenairo with people who know this. I live in Australia and am a resident for tax purposes. If i was to invest 50K in shares on the AIM (alternative investment market) and in about 2 years time the shares were worth 550K (so i've made a 500 K gain) if i was wanting to sell my shares to make that profit, how much CGT would i pay ?

Thanks in Advance

Paul

p.s the reason i ask is i have been told NOTHING then i've been told 50% so as you can see im just going back and forth

 

[korrupt_1]

CGT is calcaulated on the same tax scale as your income from what I understand.

So... for CG of 500K.. then that puts you on the top tax bracket of near 50%...

 

[korrupt_1]

... just noticed that you mentioned the "alternative investment market"... not sure what you mean by that...

If you mean CFD's, then CFD is a grey area when it come to taxation matters...

On one hand, it can be looked as a form of 'gambling'... but then if you do it regular and often enough, then it would be looked upon as a CG taxable activity.

As always mentioned on anything on this forum relating to tax, it's best to seek your own professional advice from someone qualified.

 

[AlterEgo]

CGT is calcaulated on the same tax scale as your income from what I understand.

So... for CG of 500K.. then that puts you on the top tax bracket of near 50%...

Except if the shares were held for more than 12 months, in which case the CGT payable would be half that.

BTW, just how do you think you're likely to make a 1000% return in 2 years?

 

[Beeper]

AIM, is a sub-part of the London Stock Exchange.

and no i don't expect to make that much return i just wanted to see if CGT would be applied to it after 1 year, as i've been told it does and some people say it doesn't... so i think i will go to the accountant! haha

 

[white_goodman]

what CGT is applied if you say buy $1000, 1 week later sell for $2000? Does that mean im paying $500 tax?

 

[AlterEgo]

what CGT is applied if you say buy $1000, 1 week later sell for $2000? Does that mean im paying $500 tax?

Depends on what tax bracket you are in. If you are in the top tax bracket, ie. over $180,000, then you'd be paying 45%, so $450 tax. Yep, it's criminal!

 

[ans25]

As far as I know,

It is Money spent on shares (including brokerage costs) - total Profits received

eg-

If I spend 200k on shares + brokerage and I make profit of 100k, then immediately put the 100k back to buy more shares, what happens then?
Would I still have to pay tax on the 100k?

 

[AlterEgo]

If I spend 200k on shares + brokerage and I make profit of 100k, then immediately put the 100k back to buy more shares, what happens then?
Would I still have to pay tax on the 100k?

How that is treated depends on whether you are regarded by the ATO as a share "invester" or "trader", but basically YES, you will have to pay pay tax on the 100k.

 

[rider58]

If I were on no more than 45kp/a and was to make an 100% profit on $8,000 ( adi stock ) within a few months, perhaps as little as one. What would I pay If i registered $10,000 in losses over the past 3 years ( study etc )

 

[jancha]

If I were on no more than 45kp/a and was to make an 100% profit on $8,000 ( adi stock ) within a few months, perhaps as little as one. What would I pay If i registered $10,000 in losses over the past 3 years ( study etc )

I would say any loses from your past financial years would be brought forward against your gain for this year.
I'm not an accountant but as a day trader any losses incurred over past financial years are taken off any profits gained the following year.

 

[So_Cynical]

If I were on no more than 45kp/a and was to make an 100% profit on $8,000 ( adi stock ) within a few months, perhaps as little as one. What would I pay If i registered $10,000 in losses over the past 3 years ( study etc )

Not sure what you mean by "registered" losses? to reduce for gain for this year by your losses from previous years the losses have to be stated on your previous tax assessments....and be claimable losses, capital losses, study is not a capital loss..and i doubt study could be part of the cost base.

Lest that's what i reckon.

 

[The Muffin Man]

Hi Guys and Girls, new here..

just need to run a scenairo with people who know this. I live in Australia and am a resident for tax purposes. If i was to invest 50K in shares on the AIM (alternative investment market) and in about 2 years time the shares were worth 550K (so i've made a 500 K gain) if i was wanting to sell my shares to make that profit, how much CGT would i pay ?

Thanks in Advance

Paul

p.s the reason i ask is i have been told NOTHING then i've been told 50% so as you can see im just going back and forth

Ok;

Your Capital Gain is $500,000. This amount is calculated by subtracting your Cost Base ($50,000) from the consideration you received upon sale of your shares ($550,000).

Because you have held your shares for longer than 12 months, you are entitled to a 50% discount on your Capital Gain, meaning you have assessable income of $250,000 from the transaction.

This $250,000 is then added to any other forms of income you may have earned for the year.

 

[The Muffin Man]

If I were on no more than 45kp/a and was to make an 100% profit on $8,000 ( adi stock ) within a few months, perhaps as little as one. What would I pay If i registered $10,000 in losses over the past 3 years ( study etc )

Generally, Capital Losses can only be applied against Capital Gains (i.e. you can't apply losses from the sale of shares against your normal salary or wage to reduce your assessable income)

 

[rider58]

So worst case, what percentage of the profits would I be taxedon $8,000 for the year, 50%?

Thanks for all the input

 

[The Muffin Man]

So worst case, what percentage of the profits would I be taxedon $8,000 for the year, 50%?

Thanks for all the input

Do you mean if you have made a gain of $8000 on the sale of shares?

For example, you originally purchased the shares for $10,000 then sold them for $18,000?

If that's what you meant, it depends on how long you held the shares for. When you hold an investment for greater than 12 months, you get a 50% discount on your capital gain, but if you hold the investment for less than 12 months, you don't get any discount on your capital gain.

So, if you held the shares for greater than 12 months before selling, you would pay tax on $4000. ($8000 capital gain x 50%)

If you held the shares for less than 12 months before selling, you would pay tax on the full $8000 capital gain.

The amount of actual tax you would have to pay on either the $4000 or $8000 depends on what your overall taxable income is.

 

[SmellyTerror]

Ok, ok, look. Forget the CGT words for a sec.

You pay tax on income, right? If you do a day of overtime, that extra money is just added to the amount you make that year, and taxed. So if you're paying 40% tax, 40% of that overtime money will go out in tax, right?

Income is income. So if your income comes from selling shares, well, it's taxed. Income, of course, means profit in this case - so the cost of getting the shares etc isn't profit, obviously, just the amount you came out ahead when you sold them. The income.

So if I spend $50,000 to buy shares (spending $49,500 on the shares, plus $500 on brokerage etc), then sell them for $70,000 (so I might have sold them at $72,000, but after brokerage and interest I come out with $70,000 in my hand), I just earned $20,000 income. Just as if I got a second job and earned $20,000. I pay tax just as if my income was $20,000 more. So if I'm still in the 40% range, I pay $8,000 tax.

The only complication here is that, happily for some people, if you hold an asset for longer than a year, half your profit from that sale is tax free.

So if my $50,000 -> $70,000 sale goes through after a year or more, I actually only add $10,000 to my income this year for tax purposes.

...but otherwise it is EXACTLY as if I'd just made $10,000 more at my job, or whatever. Income is income. There is, in effect, no such thing as a CGT, because the T part is just your income tax. It's more of a CGDiscount under certain circumstances.

 

[The Muffin Man]

If you want to become financially literate, you're going to need to know the difference between a Capital Gain and Ordinary Income, so I personally think you would be best to start identifying what is and is not a Capital Gain. Just my thoughts, especially if down the track you want to hold investments in a structure. (company, trust etc)

 

[rider58]

Thanks guys, that clears it up a little more... Where is the best place to go to learn about all this more?

Just to toss a spanner in the works. I've been buying these over the past two year. So would this mean some are calculated for the post 12 and some on pre 12months?

 

[The Muffin Man]

Thanks guys, that clears it up a little more... Where is the best place to go to learn about all this more?

Just to toss a spanner in the works. I've been buying these over the past two year. So would this mean some are calculated for the post 12 and some on pre 12months?

The internet would be the first place to look, and I'm sure there would be a huge amount of examples on the internet too. Maybe even a library to look for a textbook? There is always the option of talking to an accountant also.

You're right about some of the shares being post 12 months, and some being pre 12 months. Each parcel of shares keeps the date they were purchased as well as the purchase price, and are separate from the parcel you might have purchased a month before, or a month later. If you decide to sell part of your holding, you can also choose specifically which parcel of shares you want to sell. For tax reasons, you might choose to sell the first parcel of shares you purchased, or you might choose to sell the last parcel of shares you purchased.