How can you reduce Capital Gains Tax?
Reducing Capital Gains Tax (CGT) can be achieved through several strategies, depending on your situation. Here are some of the most common methods to help minimise CGT:
- Main Residence Exemption
- CGT Discount (50% Discount for Individuals)
- Use of Capital Losses
- Small Business CGT Concessions These concessions include:
- 15-year exemption
- Retirement exemption
- Rollover
- 50% active asset Superannuation Contribution
- Consider Timing of Sale
- Utilising Tax-Effective Investment Structures:
- Family trusts can sometimes provide tax-effective ways of managing capital gains.
These structures can allow you to distribute capital gains across beneficiaries.
- Claiming Other Deductions
- When selling an asset, be sure to deduct any costs related to the acquisition, maintenance, or sale of the asset (such as legal fees, agent’s fees, or improvements to the property). These can be deducted from your capital gain and thus reduce your CGT liability
Things to Keep in Mind:
- It’s essential to keep records of your assets, including their purchase price, date of acquisition, any improvements, and associated costs of sale.
- Be aware that CGT rules can change, so it’s important to stay informed or seek advice regularly from a tax professional or accountant.
- Each individual’s tax situation is unique, so consider speaking with a tax advisor to develop a personalised strategy for reducing CGT.