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Capital Gains Tax & Income Tax

May 27, 2023

Capital Gains Tax and Income Tax, what's the difference?

Income tax is a tax on your income, wages, and earnings. It is calculated based on your taxable income and is paid on the money you earn from your job or business. The Australian Taxation Office (ATO) is responsible for administering the income tax system in Australia.

The amount of income tax you pay depends on your taxable income, which is calculated by subtracting any deductions you are eligible for from your total income. Deductions can include work-related expenses, charitable donations, and other expenses that are related to earning your income.

The ATO provides a range of tools and resources to help you understand how income tax works and how it is calculated. You can use the ATO’s online tax calculator to estimate how much income tax you will need to pay based on your taxable income.

Capital gains tax (CGT) is a tax on the profit you make when you sell an asset that has increased in value since you bought it. CGT applies to assets such as real estate, shares, and other investments.

The amount of CGT you pay depends on the amount of profit you make when you sell the asset. The CGT rate is generally equal to your marginal tax rate, which means that the more profit you make, the higher the rate of CGT you will pay.

There are some exemptions and concessions available that can reduce the amount of CGT you need to pay. For example, if you sell an asset that you have owned for more than 12 months, you may be eligible for a 50% discount on the CGT payable.

I hope this helps. Let me know if you have any other questions.



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