Capital Gains Tax (CGT) is one of those terms that makes many people uneasy. It usually comes up when selling something significant, like a rural property, rental, shares or even part of a business. The tax bill you receive because of it can feel like it takes the shine off what should be a positive step forward.
But with the right planning, CGT does not have to be a surprise. In fact, it can be managed in a way that may save you thousands and supports your bigger goals – whether that is reinvesting, retiring, or passing assets on.
What is CGT?
Simply put, CGT is the tax you pay on the profit made when selling a capital asset. It is not a separate tax, but part of your income tax. The gain is worked out by comparing what you paid for the asset (including costs like stamp duty, legal fees, or improvements) against what you sold it for.
Common CGT Triggers:
- Selling a rural, rental, or commercial property
- Selling part or all of a business
- Selling shares or other investments
Concessions and Reliefs:
If you own an asset for more than 12 months, you are generally entitled to the 50% general discount. This means that you pay tax on a maximum of 50% of the gain on sale.
If you are an eligible small business, the good news is there are concessions available that may significantly reduce a CGT bill in certain circumstances. These include:
- The 15-year exception (where you have owned an active asset for at least 15 years and are retiring or permanently incapacitated)
- The 50% active asset reduction
- The retirement exception (up to a lifetime limit of $500,000)
- The rollover provisions (allowing you to reinvest without immediate tax consequences)
Some concessions are specific to businesses, while others apply more broadly. Knowing which one applies to your situation can make a big difference.
Why Planning Matters:
We regularly see individuals and business owners miss opportunities simply because they did not get advice early enough. A sale planned months, or even years, in advance can be structured in a way that protects your hard-earned wealth.
At Palfreyman Chartered Accountants, our role is to bring clarity to a complex topic – whether you are selling a rural property, passing on a family business, or simply weighing up an investment option – so you can step forward with confidence, not confusion.
Are you thinking about selling a property, business, or investment? Learn more about how we can help here: Capital Gains Tax Advice
