Capital gains tax, commonly referred to as CGT, is a tax on the profit that arises from the sale or disposal of an asset, such as property, shares, or a business. In Australia, capital gains tax applies to both individuals and businesses, and it can have significant implications for business owners if you’re not aware of what it may cost you.
Capital gains tax can impact both individuals and businesses. When selling a business, capital gains tax can reduce the amount of profit that the business owner receives from the sale and can be quite a shock if you hadn’t accounted for it. It can also impact business owners who are looking to retire or exit their business, as capital gains tax can reduce the value of their retirement nest egg.
But here at PCR, we make sure our clients know what they can expect to pay BEFORE they sell a big asset and can implement structures and investigate the availability of any possible concessions to reduce the tax payable as much as possible.
When do I have to pay capital gains tax?
The capital gains tax applies when a capital asset is sold or disposed of, whether it be through a sale, gift, or other means. This EXCLUDES the sale of your home. So, if you’re selling your small business, you’ll have to pay capital gains tax. However, the amount payable depends on several factors, including the type of asset, the length of time it was held, and the individual or business’s tax bracket.
How is capital gains tax calculated?
Here in Australia, you can’t sell off a big asset like your business without being taxed, but it can be a little less frustrating if you know what you’re up for from the start.
The tax is calculated on the difference between the cost of the asset and the sale price, less any expenses incurred in the sale. For example, if a business owner sells a business for $1 million, and the cost of the business was $500,000, then the capital gain is $500,000. Assets held for more than 12 months may be eligible for a discount of 50%. For example, if a business owner sells a business after holding it for three years, the capital gain will be reduced by 50%.
What can PCR Accounting & Advisory do to help with capital gains tax?
At PCR Accounting & Advisory, we are a team of experienced CGT accountants and tax advisors who specialise in helping clients understand, calculate, and manage their tax effectively and protect their assets.
We work closely with clients to ensure they understand the tax implications of selling or disposing of a capital asset and provide guidance on how to structure the sale to minimise the impact.
We can assist clients with a range of capital gains tax-related services, including:
- Advise on the use of small business concessions, rollover relief, and other strategies to reduce the amount of capital gains tax payable.
- Calculate the amount of tax payable on the sale of a business or asset, taking into account any relevant factors, such as the length of time the asset was held and any expenses incurred in the sale.
- Ongoing support to clients to help them manage their capital gains tax obligations, including advice on record keeping, reporting requirements, and payment deadlines.
It is critical to make informed decisions and have the correct strategies in place when selling a capital asset. By working with PCR Accounting & Advisory, business owners can ensure they receive the maximum benefit from the sale of their assets and minimize the impact of capital gains tax. Call us today on 03 9847 7516.
Owner of PCR Accounting & Advisory, Peter Marmara-Stewart is a top-tier accountant and financial advisor dedicated to helping clients reach their business goals and achieve financial freedom. Peter is highly regarded for his client-focused approach and entrepreneurial spirit, catering to a diverse range of professionals across a wide scope of industries all across the country. Peter’s expertise can help you plan effectively, set goals, maximise profits and protect your assets. Get in touch today on (03) 9847 7516.