Capital Gains Tax (CGT): What it is and what it means for medical professionals

Capital gains tax (CGT) is a type of income tax that you may be required to pay when you profit from selling an asset. This asset could be something physical like a property, or it could be something like investing in stocks and shares. As a financially secure doctor with a solid financial portfolio, it is likely that you will pay CGT at some point in time – whether you end up earning a return on an investment you have made, or you end up making a profit on the sale of an investment property or other asset.

If you are liable for CGT, you will be required to report this in your annual tax return as part of your taxable income. This will be taxed at your marginal tax rate, based on the capital gain that you have made.

So, how do you work out your capital gain? Generally speaking, you calculate this as the amount you earned for the sale of the asset, minus the amount you paid to purchase it. For example, if you purchased an investment property for $500k but later sold it for $750k, you would calculate your capital gain as $750,000 - $500,000, which gives you a capital gain of $250,000.

In the event that you make a loss on your investment (that is, the amount you paid for the asset is greater than the amount you earned by selling it), you will not be liable for CGT. Whilst you will also not be able to claim the loss as a tax deduction, you are able to use it to reduce your liability for any other capital gains you may have incurred that tax year.

There are some variables that can come into play which will influence the amount of capital gains tax that you are liable for. For example, if you used the asset for private use for a period of time, you may be eligible to reduce your capital gain liability for that time. You may also be eligible for a reduction based on the amount of time you held the asset for (for example, if you hold it for over a year, you may be able to reduce it by 50%).. Because CGT liabilities can be complex to calculate and understand, it is important that you seek financial advice from a financial advisor any time that you are looking to sell one of your assets. As a client of Medical Wealth Planning, you can trust our experienced financial advisors to help you to minimise or reduce your CGT liability, for a better financial position overall. To find out more about Medical Wealth Planning’s services, book an appointment with our team of experienced financial professionals today.