Capital Gains - Tax, 31729792, page-14 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

Originally posted by Slogger ↑

as mentioned above:

1) for any stocks held for investment purposes:
- if held for more than 12 months you pay tax on 50% of the gain. The eventual tax rate will depend on your other taxable income (assuming you are an australian resident for tax purposes). so tax rate at the highest level with medicare levy would be close to 25% of the 50% taxed gain (the other 50% tax free) - in effect a 25% tax rate on your gain;
- if held for less than 12 months then you are taxed on 100% of your profit. You do not pay tax of 100% of your profit but are taxed on 100% of your profit. Therefore on the same basis as above you do not get the 50% capital gains discount so the most you can be taxed is approx. 49% of the total gain. However agin it depends on your other income because the eventual tax rate will depend on your taxable income and the various tax thresholds you fall in.

2) for any trading stock - taxed on 100% of the gain and again the eventual tax rate depends on your other income - the most tax you pay is 49% of the total gain BUT that depends on your other income and the tax rate could be substantially lower.

of course losses can be offset against gains - so it can get a little complicated not knowing your circumstances.

can't see why you would sell out because even if you pay some tax you will still be better off.

above is IMO so DYOR and maybe get further clarification from your accountant as it appears to me you may be misunderstanding what he is saying.

above is not advice in any way just from what I understand but that could be incorrect so please obtain the clarification you require from a suitably qualified accountant.

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Generally accurate, but some points of clarification required:
- The top marginal personal tax rate is currently 47%, not 49% (i.e. 45% + 2% medicare levy).
- Most ASX stock punters, regardless of what they say or think they are doing (eg: "I am investing", or "I am trading"), are actually classified by the ATO as "investors", as opposed to "traders". There are specific rules associated with whether the ATO will accept and treat someone being classified as a "trader". Making a whole bunch of trades during any given financial year is only part of the required criteria. Having a "trader" status means that your profits/losses are treated as operating income/loss and are not treated as capital gains/losses (as per CGT provisions). This might seem like semantics, but there are circumstances in which how someone is classified by the ATO can have a material impact on the tax payer. For most people in most situations, being an "investor" is fine. Some people are just very, very active investors.

The original poster seemed to be getting confused between how the tax payable is calculated and what the applicable rate of tax is. It sounds like his accountant was referring to the 50% capital gains discount for an asset held for 12 months or longer (i.e. 50% of the gain is tax free), rather than anything else, which you have amply explained.