Ways to manage a capital gain

Have you made a taxable capital gain this year?  If so, time is running out to manage its tax impact.

Before starting our discussion there are three key things to keep in mind:-

  1. Capital gains are recognised by contract date; not when you receive the proceeds.

  2. Capital gains are halved if the asset was owned for more than 12 months; but companies pay tax on the full gain.

  3. But capital losses are offset against the capital gain before applying that 50% discount.

So if you have already made a capital gain in this 2020/21 tax year, is there any other asset you can sell to generate a capital loss that can reduce that gain?

If you still have a net capital gain, other options for reducing the tax liability are:-

  • An investor may be able to prepay interest.

  • You could make concessional (deductible) contribution – but seek financial planning advice first as there are many other considerations to take into account.

  • Make a donation.

  • If a trust is the one which has made or will make a capital gain, see whether any possible beneficiary has any capital losses or are on lower marginal tax rate.

TIP

If you need to sell an asset can you delay executing the contract for two weeks?  If so, anything sold in July will not require a tax payment until after the 2021/22 Tax Return is lodged.

As you can gather there is no cookie cutter approach.  We welcome your call to discuss your situation and options.

At MRS, we will spend today planning for your success.