Capital Gains Tax (CGT)
When you sell an asset, whether as part of your business or in a personal capacity, it’s very easy to forget that there will probably be tax consequences. CGT operates by taxing any increase in value from the time the asset was acquired or created. The capital gain is taxed in the year the asset is sold. The amounts that are subject to tax vary, but the resulting capital gain is included with your income, and taxed at whatever marginal rate you would then pay. The amount that is added into your assessable income is known as the ‘net capital gain’.
Trusts and Tax
A trust is basically a structure which allows a person or company to hold an asset for the benefit of others. The assets held in a trust can vary – property, shares, businesses and business premises are all commonly held in trust structures. From a tax perspective, the main advantage is that any income generated by the trust from business activities and investments, including capital gains can be distributed to beneficiaries in lower tax brackets (often spouses or children). The problem with trusts is that they have become – in the minds of the ATO at least – synonymous with tax avoidance, particularly where they are used by the highly wealthy.
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