Capital Gains Tax (CGT) can be confusing, particularly when selling property, shares or other investments. Understanding how a capital gain is calculated and what records you need can make the process easier.
A CGT accountant can help you understand the tax implications of selling or disposing of an asset, review relevant financial records and explain how the transaction may need to be reported. Seeking professional advice before completing a major transaction can also help you understand potential tax consequences.
What Is Capital Gains Tax?
Capital Gains Tax is the tax that may apply when you make a capital gain from disposing of certain assets. A capital gain generally occurs when the proceeds from disposing of an asset are greater than its relevant cost base.
CGT can apply to assets such as:
- Investment properties
- Shares
- Managed investments
- Business assets
- Other eligible investments
The tax treatment depends on the type of asset and your individual circumstances.
What Does a CGT Accountant Do?
A CGT accountant can help with different stages of a capital gains tax calculation.
Reviewing the CGT Event
The first step is understanding what happened to the asset. Selling, transferring or otherwise disposing of an asset can have tax consequences.
An accountant can review the transaction and explain whether CGT needs to be considered.
Calculating the Capital Gain
Calculating a capital gain may involve more than simply subtracting the original purchase price from the selling price.
The cost base can include certain acquisition and ownership costs, depending on the circumstances. A tax professional can review relevant records and help calculate the applicable gain or loss.
Reviewing Capital Losses
If you have made capital losses, these may be relevant when calculating your overall capital gains position.
An accountant can review previous records and explain how relevant capital losses may affect your tax position.
When Should You Speak to a CGT Accountant?
Many people wait until after selling an asset before seeking tax advice. For more complex transactions, this can be a poor approach.
Consider speaking to a CGT accountant before:
- Selling an investment property
- Selling shares or investments
- Transferring an asset
- Restructuring investments
- Selling a business asset
- Making a significant property transaction
Getting advice before a transaction can help you understand the potential tax implications before making a decision.
CGT and Property Investment
Property is one of the areas where CGT can become particularly important.
If an investment property is sold, the owner may need to consider the original purchase price, eligible costs, improvements, selling expenses and other relevant information when determining the capital gain.
A capital gains tax accountant can review the available documentation and explain which information may be relevant to the calculation.
The tax treatment can vary depending on the property and how it has been used, so property owners should avoid relying on general assumptions.
What Records Do You Need for CGT?
Keeping accurate records is important when dealing with capital gains.
Depending on the transaction, useful documents may include:
Purchase Documents
Keep contracts, settlement statements and other records relating to the acquisition of the asset.
Improvement Costs
Invoices and receipts for eligible improvements may be relevant to determining the cost base.
Selling Costs
Records of eligible selling expenses, such as certain professional or agent costs, may also be required.
Ownership Records
Maintain documents that establish ownership and relevant dates associated with the asset.
Good record keeping can make it easier for an accountant to review the transaction and prepare the relevant tax information.
How Can a CGT Accountant Help You Plan Ahead?
CGT should not always be considered only at tax-return time.
If you are planning to sell an investment, professional advice can help you understand the potential tax consequences before completing the transaction.
This does not mean an accountant can eliminate CGT. Instead, professional advice can help you understand the applicable rules, maintain appropriate records and consider legitimate tax planning opportunities.
Choosing a CGT Accountant in Canberra
When looking for a CGT accountant in Canberra, consider their experience with the type of transaction you are dealing with.
Ask about:
- Experience with property and investments
- Capital gains tax services
- Tax planning
- Record requirements
- Fees and communication
- Broader accounting services
It is also important to check that the relevant tax practitioner is appropriately registered where registration is required.
How Financial N Legal House Can Help
Financial N Legal House provides accounting and taxation services alongside finance, financial planning, legal services, business services and property investment support.
This broader range of services can be useful when a tax issue is connected with property, business or wider financial planning.
For a broader overview of taxation and accounting services, read our Tax Accounting in Canberra: Complete Guide to Tax and Accounting Services.
FAQs
What does a CGT accountant do?
A CGT accountant helps clients understand capital gains tax, review relevant records, calculate capital gains or losses and prepare the appropriate tax information.
When should I contact a CGT accountant?
Consider seeking advice before selling an investment property, shares, business assets or other assets that may create a CGT event.
Can a CGT accountant help with property?
Yes. An accountant can review relevant property records and help explain the potential tax implications of selling an investment property.
What documents do I need for capital gains tax?
Purchase and sale contracts, invoices, improvement records and other documents relating to the asset may be relevant when calculating a capital gain.
Can an accountant reduce my capital gains tax?
An accountant cannot simply remove a legitimate tax liability. However, they can explain applicable tax rules and identify legitimate tax planning opportunities based on your circumstances.
Email: info@financialNlegalhouse.com.au
Address: 8/14 Brierly St, Weston Creek, ACT
Phone: 1300175468