An asset is a resource that holds economic value and is also expected to provide benefits in the future to its owner and the owner’s legal descendants. Assets may come in different shapes and structures. It can either be any form of money or some property.
So how can someone differentiate between assets and income? It is simple since there lies a thin line between assets and income. Income is something that a person receives in place of working for something, and an asset is some property owned by a person or passed down in the family of that person.
There are some incomes and assets that you require to pay tax for, and some assets and incomes are exempted from paying taxes in Australia. Here in this article, we will be discussing certain assets for which you are liable to pay taxes. However, you can always consult with your capital gains tax accountant regarding any issue you face while paying taxes for all the valuables you possess. First, let us understand which assets and incomes are taxable and exempted from paying taxes.
Taxable Income in Australia
It’s not just in Australia, but in the entire world; everyone must pay income tax. Nevertheless, certain income limits require tax, and other incomes below the requisite amount are exempted from paying tax. So, being an Australian citizen, if your monthly income is more than $18,200 and above, you must pay taxes.
Non-Taxable Income in Australia
There are certain incomes that the Australian government has exempted from tax. People earning less than $18,200 every month do not require to pay any tax to the government. However, certain central government pensions of Australia are exempted from paying any tax to the government.
What is Capital Gains Tax?
When in Australia, one must pay Capital Gains Tax on the profits that one earns by selling their property. So if you are deciding on selling your property, you must keep in mind that you are required to pay taxes on the profits you make after selling your asset(s). However, it is highly recommended that you hire a Capital Gains Tax accountant for yourself to have an easy understanding of everything related to your assets and the tax you are required to pay.
Taxable Assets That You Need to Pay Tax For
It is seen that in Australia, most of the assets are exempted from paying taxes. However, if you sell one of your properties, you profit from it. As per the rules of the Government of Australia, you need to pay tax on the profit that you have made after selling your property.
Nevertheless, real estate properties are liable for Capital Gains Tax payment. Real estate like – rental properties, holiday homes, empty landforms, hobby farms and business premises are taxable assets. However, your residence where you are living at present is exempted from any tax.
Investments like shares and units require the payment of capital gains tax since those are being sold from a fund managed by someone else.
Cryptocurrency has been in trend since the year 2009. There might be a time when you are preparing yourself to trade off all the cryptocurrencies you own. So capital gains tax might have a chance to get applied to your cryptocurrencies.
However, if you use your cryptocurrencies for personal use, then they might stand a chance of being exempted from capital gains tax.
The valuation of currencies differs from place to place. So if you are using foreign currency, you might get a greater valuation at the exchange centre. So that means you have gained profit. No matter how much the profit valuation is, if you own foreign currency, you must pay capital gains tax.
Assets That Are Exempted From Tax Payment
Your residence is exempted from Capital Gains Tax, but it might teach if you – use your residence for business purposes, rental purposes; and if it covers more than 2 hectares of landmass.
If you own a hatchback or a motorcycle, you are not required to pay Capital Gains Tax since it is considered that it weighs less than 1 ton and carries less than nine passengers.
Granny Flat Arrangements
Granny flat arrangements have also been exempted from any capital gains tax.
So it is very clear that all the assets you own in Australia are exempted from capital gains tax. But the capital gains tax is applied to those assets when you start making a profit out of it or associate those assets for a business.
When you sell your assets to someone, they might decide to pay you for your assets through cryptocurrencies and not in real cash. So what happens after that? You trade off the cryptocurrencies that you own in place of real cash.
As per the Government of Australia, all the citizens involved in trading cryptocurrency are required to keep records of every cryptocurrency transaction they make. So, in that case, you are most likely to require the help of a crypto tax accountant who will completely guide you through the entire process of record-keeping and transactions. Be rest assured that they will give you the correct advice; if you are an investor or a cryptocurrency trader, they will give you proper guidance accordingly.
Some assets and incomes require the payment of direct tax. However, some of the assets in Australia require the payment of capital gains tax.
You might feel that you need to pay taxes for anything and everything that you own as an asset in Australia. But that is not the case. You are charged to pay taxes only if you gain profits from them and indulge your assets within business purposes. And cryptocurrency is not usually purchased for personal transactions but for business and trading purposes. So you need to pay capital gains tax for any crypto transactions you make. When it comes to dealing with such financial jargon, we always suggest associating with financial experts who can walk you through the entire process.