We get bombarded with questions in relation to capital gains on various
investments. It is surprising that although many of these investment
instruments look similar, but their tax treatment’s may be different. Also, in
some cases they may not be subject to capital gains tax but fall under the
regime of business income.
Due to the complexity in their nature It is best to see an accountant who has
extensive experience in Tax treatment of theses various instruments as you
may be able to save a lot of money in paying tax or even get a higher tax
refund in some Investment loss situations.
I have tried to summarise different scenarios as below (These are the most
probable scenarios but in certain cases treatments may be different hence it is
advised to see an accountant to do the final calculation)
1. Crypto currency normally fall under the capital gains/loss regime. Any
gain from crypto currency is added to your ordinary Income and you will
pay the tax based on your tax threshold. You can however get a 50%
discount if you have held the asset for more than 12 months. In the case
of a loss however it cannot be deducted against ordinary income but
only against any other capital gains that you may have incurred in the
same financial year or else the gain is carried forward to later Income
2. Share trading gains/losses are the interesting ones wherein they could
be treated as capital gains/losses or business income /loss.
It is advisable to us an accountant to figure that out for you as there are
many factors that contribute to making that decision. But in short if the
asset has been held for long periods of time as an investment and not
sold regularly as a trader then it would fall under the capital gains tax
act. A trader or business would mostly be trading daily and buy and sell
shares frequently with a view to make profit and not hold them as a
long-term Investment. A trader will also need an ABN number to do so.
tax treatment in both cases is different.
In the case of a capital gain, you can get a 50% discount on gains if the
asset is held for more then 12 months but in the case of a loss it is
carried forward to following year if there are no capital losses to deduct.
In the case the sale of shares is treated as a business you lose out on the
50% capital gains discount, but losses can be claimed against ordinary
Income which may help reduce tax debt on other income or may
increase the tax refund from ordinary Income. As a trader you may get
more deduction such as home office expenses, etc
3. Managed funds have various income labels such as capital gains, foreign
income, NPP income from trusts, franked dividends which have tax
credits attached to them. Managed funds are the easiest as the funds
report all the information to ATO and hence are automatically prefilled
on to your My Gov Tax Statement or the tax agents portal. The tax
treatment is what is prefilled by ATO. Capital gains as explained above,
foreign income adds to your ordinary Income, NPP income from trusts
adds to your ordinary Income and so the franked dividends.
4. CFD trading such as forex and crude oil are different from all other
investments as they neither fall under the capital gains regime nor
Business income rules. Profits from CFD trading are treated as other
Income and added to your ordinary Income. But the best part is CFD
losses are considered a deduction and hence reduce your ordinary
leading to higher tax refunds or less Tax payable. Our client hate it when
they incur the loss but love it when they come to us as it results in high
tax refunds. To claim such a loss or income we need the tax statement
from you trading platform.
An easy example – A taxpayer’s taxable income for FY 2021-2022 is
$150,000 from PAYG source and they incur a cfd loss of $50,000. They
may be able to get a tax refund of approximately $19,600 depending on
Individual circumstances. Definitely helps them recover some losses. The
above scenario is not guaranteed and a qualified accountant needs to
look into it to make the final decision.
5. Sale of Rental Property (Investment property)- It falls under the capital
gains/ loss tax rules as explained above.
Apart from that there are other rules that may be applied to reduce
capital gains or even nullify them. Such as principal place of residence
rules(PPOR) , and the 6 year capital gains exemption rule. PPOR and the
6-year Exemption rule can only be applied if the tax Payer has lived in
the property and was their PPOR for at least 6 months after they bought
the property. In such cases the taxpayer may be exempt from capital
gains if the property has been sold in the 6-year period.
If the Tax has initially rented the property and made it their principal
place of residence later then certain exemptions can still be given on a
In the case where the taxpayer has lived in the property all through and
it was their principal place of residence then they are exempt from any
capital gains tax.
Also, expenses such as stamp duty, legal fees, commission on sale of
real estate can also be deducted when calculating capital gains tax.
It is highly recommended to see an experienced accountant in these
cases as varied scenarios can result in huge tax savings. Individual
circumstances can be different, and the above rules may not apply to
Some common expenses that may be claimable in the above cases are –
Interest on loan used to fund the investment, loan administration
charges & brokerage, investment course fees in the case of trading
financial instruments to derive profit, Internet and phone usage in case
of trading, home office in case of trading as a business, memberships &
subscriptions fee to assist in trading, travel to courses.