2022 BRN Discussion, page-3394

Umm .. no .. worth getting some tax advice.

The process I use personally is:
Purchase cost (say $10,000 and let’s call that a “cost base”
- Sale Price (say $15,000 and let’s call that a “realised value”
= Capital Gain (would be $5,000 here)

Then if held for more than 12 months only 50% of that Capital Gain can be taxable so:
Taxable Gain = 50% of Capital Gain (say $2,500)

Then than Taxable Gain is added to my taxable income which would attract whatever marginal tax rate is applicable (don’t forget to include extras like Medicare levy). Here let’s assume that is 37% plus 1.5% Medicare levy so 38.5%.

That makes the tax payable in respect of this transaction (ignoring reductions of Capital Gain like brokerage/transaction costs and say portion of related costs for administering and managing my holdings) of:
38.5% x $2,500 = $962.50.

That therefore means I made a “profit after tax” of around:
$5,000 - $962.50 = $4,037.50.

So now I have $10,000+$4,037.50 with which to buy another investment if I wish. Maybe that is buying back into the same share … I’m sure others can then work out by how much the share price needs to drop from my assumed top in order to end up with a “profit” later.

Now of course there are many variations which could apply to me. Maybe my marginal tax rate is different to the assumed 37%. Maybe I do have to contribute to Medicare levy. Maybe I don’t have private health cover and so have another tax to add on. Maybe I didn’t hold the shares being sold for at least 12 months in which case I don’t get to reduce the taxable gain by the 50% above. Maybe I hold the investment in a super account in which case depending on the rules applicable there maybe I’m subject to 15% tax rate or maybe nil tax. Maybe I’m categorised as a trader not an investor and thus capital gains is a foreign concept and instead I look at income and expenses to net off my taxable income.

Sooo sooo maybe permutations there.

But that’s the basic premise on which I operate - surely each person though would turn to their paid advisor to obtain their own advice which is at least afforded protection of that service arrangement and their indemnity insurances should the advice be wrong …

No advice given here other than make sure you seek your own relevant advice in the right spots.