OK, CGT is calcaulted on your income tax rate. By that, do we mean the income earned only or does it include the total amount on income including what is captial gains eg:
Earnings from Employer $10,000
Earnings from property A sold less than 12 months $15,000Captial Gain Property B $23000
Capital Gain Property C $10000.So is it corrent that I’ve earnt “earnings of “$25,000”, putting me in the tax bracket of 30% when calculating the captial gains. (Or do I have to take the other $33,000 capital gain into account when working out the tax rate in which case I’d be in the 42% bracket).
Hope this makes sense.
PKPurpleKiss,
Correct me if I am misinterpreting your question, but are you refering to including you unrealised gains? I’m not to sure on the situations for property B and C in your example.
Your marginal tax rate is derived from income (Salary, rent, dividends, Trust distributions, realised capital gains etc.) less any deductions.
If you have held onto the asset your are selling for more than 12 months, you are also eligible for a 50% discount on CGT. Let me know if this is on track to answering your questions or clarify where I am misinterpreting your question.
All the best
RhysYou just add the CG to your yearly income (less any discounts and some costs).
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
CGT is 50% discounted
E.G. If you earnt a total of $33,000 in capital gain you get a 50% discount so you would ony have to pay tax on $17500 .You take the $17500 and add that to your taxable income.
If you now enter a new tax bracket e.g. 42 cents in the dollar. You would have to pay an extra 42 cents per dollar on $17500 this equalls $7300 .
Your money that you earnt on the lower tax brackets still only gats taxed at the lower rate.I hope this makes sense
Monopoly, my favourite game
Sorry I cant add that should be $16500 not $17500
Monopoly, my favourite game
Hi everyone.
Firstly Thanks.
Rhysadams, property B & C were sold (well, have the potentail to sell so I’m working out whether it’s worthwhile to do so).
I thought the calculation was as Monopoly said, however I recently had someone tell me that this wasn’t the case and that the capital gains would be calculated at whatever the rate was that my earnings had been for the year ie: my earnings without the captial gains would be in the 30% bracket so therefore the capital gains would be taxed at that rate.
However, if what Monopoly says (and it’s what I orignally thought) that the capital gain amount is added to the earnings and then the tax rate applied, it then means I’ll be taxed on part at the rate of 42%. If this is the case, I would possibly wait on selling one of them until next year.
Thanks everyone.
PK
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