9 Strategies to Help You Save Capital Gain Tax in 2024

9 Strategies to Help You Save Capital Gain Tax in 2024

9 Jul, 2024 By: Lotus Smart
9 Strategies to Help You Save Capital Gain Tax in 2024

Of the significant considerations by investors within Australia, one is capital gains tax. Knowing how to reduce CGT on sell-offs in property, land, shares, or any other form of investment can save thousands of dollars.

Here are nine strategies to save capital gain tax in 2024 based on data, and actionable insights.

9 Strategies to Help You Save Capital Gain Tax in 2024

1. Claim the Principal Place of Residence Exemption

One of the best ways to reduce or avoid CGT is through the Principal Private Residence exemption. If the property sold is your main residence, it could be exempt from CGT.

Property Value Potential CGT CGT Saved (Using PPR)
$800,000 $50,000 $50,000
$1,200,000 $75,000 $75,000

Illustration of Savings from PPR Exemption
9 Strategies to Help You Save Capital Gain Tax

2. Take Advantage of 50% Discount on CGT for Long-Term Investments

A 50% reduction on CGT is allowed for individuals and trusts if the assets are held for more than 12 months. This can significantly reduce this tax on long-term investment gains.

3. Offset Capital Gains with Capital Losses

You can offset capital gains against any capital losses incurred, reducing the amount that will be taxable. If there are more capital losses than gains, the excess may be carried forward to offset increases in the future.

Capital Gains Capital Losses Net Taxable Gains
$30,000 $15,000 $15,000
$50,000 $60,000 $0 (Carry forward $10,000 loss)

How losses offset capital gains
9 Strategies to Help You Save Capital Gain Tax in 2024 copy

4. Invest in Exemptions for Small Business Owners

Some of the beneficial CGT concessions available to small businesses are: the 15-year exemption, the 50 percent active asset reduction, and the retirement exemption. These concessions can be available if conditions regarding the size of a business and also how long an ownership interest has been held, are met.

5. Contribute the Proceeds to Superannuation

Any person who retires and sells an asset of their small business can contribute up to $500,000 of sale proceeds to their superannuation fund, which may have the CGT concessions deal—a strategy for retirement boosting on reduced immediate taxation bases.

Sale Proceeds Super Contribution Potential CGT Saved
$500,000 $300,000 $45,000
$750,000 $500,000 $75,000

Superannuation Contributions and CGT Savings
9 Strategies to Help You Save Capital Gain Tax in 2024___

6. Strategic use of investment structures

This means that extra tax savings and estate planning benefits can be obtained by employing investment structures like family trusts or SMSFs, which, despite their limited flexibility regarding the distribution of income and gains, can decrease CGT through smart allocations.

7. Timing asset sales to your maximum benefit

Consider the timing of selling your assets. Selling in a low-income year or spreading sales over several years can minimise your taxable income and reduce CGT liability. This will require some careful planning and monitoring of your situation.

Year Income Capital Gains Total Taxable Income CGT Rate CGT Paid
2023 $50,000 $20,000 $70,000 20% $4,000
2024 $30,000 $20,000 $50,000 15% $3,000

Timing Sales to Reduce CGT
9 Strategies to Help You Save Capital Gain Tax in 2024__

8. Rollover provisions

Some CGT rollover provisions may allow the deferral of the CGT liability if the proceeds are re-invested in a similar asset, thereby deferring tax liability until the new asset is sold. One way this might be useful to business could be restructuring or expanding.

Original Asset Sale Proceeds New Asset CGT Deferred
Property A $400,000 Property B $20,000

Illustrative Rollover Provision

9. Pre-Pay Expenses to Lower Taxable Income

Any expenditure that is investment-related, such as interest on an investment loan or maintenance expenses, and is paid in advance can help lower your taxable income, which in turn can reduce CGT payable. Such a strategy requires careful planning to ensure that this treatment complies with the tax legislation.

9 Strategies to Help You Save Capital Gain Tax

Conclusion

Most of these strategies when understood and implemented well can help save substantial amounts of capital gain tax in Melbourne. Whether you want to sell property, shares, or other investments—these methods will help you take a better percentage of profits home in 2024. However, always consult with a tax accountant in Melbourne who can tailor strategies to your specific needs and assist you in meeting the ever-changing rules of taxation.

More Helpful Resources to get Maximum Tax Deductions and Benefits: