Capital gains tax
Capital gains tax (CGT) is paid on any capital gain. It is not a separate tax, merely a component of income tax. A taxpayer is taxed on the taxpayer’s net capital gain at the relevant marginal tax rate. A capital gains tax applies to assets acquired after 19 September 1985. The tax is payable on any profit made from the subsequent disposal of the asset. The provisions dealing with capital gains are set out in the Income Tax Assessment Act 1997 (Cth).
Capital gains tax:
- is calculated by subtracting an adjusted purchase price from the total proceeds of sale, subject to some adjustments
- applies where an asset is sold or given away as a gift. The tax will not apply to the transfer of assets under a will or when a person dies without a will, and assets are transferred to next of kin. Capital gains tax must be paid only when the beneficiary disposes of the asset (this exclusion for disposal by death does not apply if an asset is given to a non‑resident or to some tax-exempt bodies)
- does not apply to a taxpayer’s principal place of residence and a reasonable surrounding area of land
- does not apply to motor vehicles
- does not apply to less valuable personal use items such as furniture, clothing and sporting equipment.
Losses made on capital items can be offset against capital gains, but not against normal income.
Calculation of capital gains
It is most important that people keep all receipts and other documentation relating to expenditure on assets to determine cost prices. All appropriate deductions can then be made and any net capital gain identified.
Exact calculation of the capital gain to include in a return depends on whether the asset was bought on or after 21 September 1999. Taxpayers may generally use indexation of the cost of the asset if the asset was bought before that date. For assets acquired after 21 September 1999, individuals, complying superannuation funds and trusts are instead entitled to apply a discount to the capital gain, which is 50% for individuals and trusts, but only ⅓ for compliant superannuation funds. Other entities such as companies, which acquired an asset on or after that date, do not get capital gains tax discount.
Generally, if a taxpayer thinks they have derived some form of capital gain, expert advice should be obtained.
Fringe benefits tax
A fringe benefit is a payment to an employee in a form other than salary or wages. Under the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTA Act), a fringe benefit is a benefit provided in respect of employment to an employee who is entitled or has been entitled to receive salary or wages. Benefits include rights, privileges and services such as subsidised loans, discounted purchases from the employer’s business, subsidised housing and the use of motor vehicles. The FBTA Act provides for the assessment and collection of fringe benefits tax.
The employer pays tax on the value of these benefits, not the employee. Fringe benefits tax is paid to the Commonwealth Government and is collected by the Commissioner of Taxation.
Many common transactions are liable to stamp duty. A document subject to stamp duty (e.g. a contract to buy land) cannot be enforced in court (except in criminal proceedings) without being stamped, nor can a document be registered without being stamped.
Common transactions subject to stamp duty are registration or transfer of registration of a motor vehicle and sale or transfer of a house and/or land.
Who pays stamp duty?
The Duties Act 2001 (Qld) places an obligation on the person executing a document that is subject to stamp duty to produce it for stamping. However, solicitors often arrange for documents to be stamped, and in some cases the other party to the transaction (e.g. the insurance company) will pay the stamp duty, but will collect it from the party liable to pay it.
The Commissioner of State Revenue may impose penalties for failure to stamp a document.
Amount of duty payable
The amount of duty payable on a particular transaction can be checked by ringing the Office of State Revenue in Brisbane.
The Queensland Government levies payroll tax. If the value of wages paid to employees exceeds $1.1 million per annum, the employer must register with the Commissioner of State Revenue and lodge payroll tax returns and pay tax as required. For further details contact the Payroll Tax section of the Office of State Revenue.
Land tax is levied by the Queensland Government on freehold land owned in Queensland as at midnight on 30 June each year. The Office of State Revenue collects land tax in Queensland and administers the Land Tax Act 2010 (Qld). The owner of taxable land is liable to pay the tax.
Goods and services tax
Goods and Services Tax of 10% is imposed on most goods and services sold in Australia. The main rules are in the A New Tax System (Goods and Services Tax) Act 1999 (Cth), and administrative rules are in the Taxation Administration Act 1953 (Cth).
Goods and Services Tax is an indirect, broad-based consumption tax on taxable goods or services (including real property and rights) in the course of carrying on an enterprise. Subject to the satisfaction of certain conditions, when a supplier acquires goods or services in carrying on their business, they may claim an input tax credit for the GST component of the price. To obtain the input tax credit, the person supplying the goods or services to the supplier must be registered (or required to be registered), the acquisition by the supplier must be undertaken with consideration and it must be connected with Australia.
Certain transactions are GST free, but no organisation is exempt from GST. The following activities are GST free, which means that the business is unable to charge the end consumer GST:
- basic food
- health and medical services
- educational services
- childcare services
- charitable services.
Registrations for GST purposes are optional for those business taxpayers whose actual turnover is less than $75 000. Any taxpayer who carries on a business where their turnover exceeds $75 000 must register. The turnover threshold for non-profit organisations is $150 000 before they must register for GST purposes. A business that provides taxi travel services must register for GST regardless of their GST turnover.
Registered taxpayers have to report their obligations and entitlements for GST on a form called the Business Activity Statement (BAS). This form is generally completed on a monthly or quarterly basis depending on the turnover of the taxpayer or the taxpayer’s preference.
The Australian Taxation Office (ATO) forwards to the business taxpayer a personalised BAS for each tax period including some information already completed and a unique identification number. The lodgement date for these forms is printed on the front page of the form.
Complex problems should be directed to a tax adviser.