Aussies thinking they can sneak their profits past the Australian Taxation Office (ATO) have been warned to “think again”.
The ATO is warning taxpayers who own investments like rental property, shares and cryptocurrency assets to report their capital gains for the purpose of capital gains tax (CGT).
CGT is a tax that applies to any profits made when you dispose of assets, including investments.
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“CGT isn’t a separate tax, it’s part of income tax, and any capital gains you declare will be taxed at your marginal income tax rate. So, it’s important to understand your obligations when it comes to declaring a loss or gain,” ATO assistant commissioner Tim Loh said.
The ATO has access to a range of data from external sources, including property titles offices and revenue agencies, crypto-asset exchanges and share registries.
“If you think you can slide under the radar and avoid reporting a capital gain, think again,” Loh said.
What is capital gains tax?
CGT comes into effect when you dispose of assets, such as shares, crypto, managed investments or properties.
You need to calculate a capital gain or capital loss for each asset you dispose of, the ATO said. You can then reduce your capital gains with any capital losses before applying any eligible discounts or exemptions.
“If you’re an Australian resident for tax purposes and you’ve kept your asset for 12 months or more before disposing of it, you can reduce your capital gain by 50 per cent,” Loh said.
“If you jointly owned an asset, remember to apportion your gain or loss based on your ownership percentage.”
Property sellers making mistakes
Loh said the ATO was seeing people incorrectly claiming the full main residence exemption when selling their home.
“Generally, your main residence (your home) is exempt from CGT, but if you’ve used it to produce income, such as renting out all or part of it, including through the sharing economy - like through Airbnb or Stayz - or running a business from home, then you may have to pay CGT,” Loh said.
The ATO is reminding taxpayers to keep good records in relation to their property ownership, particularly the income-producing period and the portion of the property used to produce income.
“Records are key, and will help you calculate the correct capital gain to ensure you are meeting your obligations,” Loh said.