Things happen. A Capital Gains Tax (CGT) asset can become lost or destroyed or partially destroyed through fire, flood or theft, for example. So what are the implications?

If this happens, you can choose to roll over your CGT liabilities. You can also roll over your CGT if you lose an asset because of fraud or if it is stolen. But you can no longer roll the CGT over if your broker sells your shares by mistake.

While you think you would not owe CGT in these circumstances, you do. Why? Because the ATO considers ownership of the asset changed. It does not matter if the asset is destroyed or lost or whether it was outside your control or accidental. In these scenarios you can use the CGT rollover that covers accidentally lost or destroyed assets. Whatever you do, do not ignore it.

However, you need to meet the conditions before you can apply the rollover.

Rollover conditions

There are strict conditions you need to meet to roll over CGT. The most important one is whether you receive a payout, such as insurance, or a replacement asset. Where you receive money, you need to use it to replace the asset within a certain time. If you do this, the ATO disregards the capital gain it assesses you made as a result of the destruction or loss of the asset. It regards the replacement to have cost the same as the original asset for the sake of CGT.

There are other rules surrounding the receipt of money to compensate for the loss or damage of an asset. For example, if you only spend some of the compensation or more than you received to replace the asset, you could have to pay CGT immediately or there may be other adjustments you are liable for.

If the original asset was bought before CGT was introduced (20 September 1985), the ATO considers that its replacement was also acquired before that date. But there are conditions such as the replacement asset must be almost the same as the original.

How the rollover rules affect you will depend on your circumstances. These rules are complex and you really should seek an expert’s advice.

If you lose an asset that is subject to CGT, do not just do nothing or assume you no longer have to pay CGT. Contact Ben for advice on the situation. He can guide you to keep you out of trouble with the tax office.

Certain types of clothing are tax deductible. But you must follow the strict guidelines of the Australian Tax Office (ATO). You cannot claim the cost or upkeep of conventional clothing worn to work. What you can claim is the cost of clothing specific to your occupation, a compulsory or non-compulsory company uniform you pay for and protective clothing.

What you cannot claim

You cannot claim a tax deduction for conventional clothing you buy to wear only to work or if your employer says you have to wear certain clothing to uphold the company image.

Everyday clothing people wear to work is generally referred to as conventional clothing. For example, neat casual, business clothes or black pants and a white shirt worn by waiters or active wear that personal trainers wear. While it may seem that the cost of clothing you wear to work is a business expense, conventional clothing is a private expense as you can wear it outside the work environment.

Clothing specific to your occupation

You can claim the cost of clothes that are specific to your occupation. This can include the uniforms of health workers and a chef’s whites, checkered pants and hat, and a judge’s robe.

Compulsory work uniforms

Compulsory work uniforms and the costs to keep them clean are tax deductible. Compulsory uniforms are clothes that specifically identify you as an employee of a particular organisation. And it is compulsory to wear the uniform in accordance with company workplace policies.

In some circumstances you can also claim the cost of socks, stockings and shoes when:

·         They make up an essential part of a uniform such as a nurse’s blue uniform, non-slip shoes and stockings.

·         The type, style and colour are part of the compulsory unform and specified in the policy, for example, air hostesses.

You can also claim a single piece of clothing, such as a vest, as long as it is part of the clothing policy, is designed and made for your employer, and identifies the company with a logo permanently attached.

Claiming for non-compulsory uniforms

The only way you can claim non-compulsory uniforms is if your company registers the design on the Register of Approved Occupational Clothing. This must be the uniform you wear to work. This means that socks, shoes, stockings cannot be a part of a non-compulsory uniform. A single clothing item cannot be either unless it is overalls or a dress.

Protective clothing claims

Protective clothing is tax deductible. This includes footwear and clothing that protects you from injury or illness while at work.

Items that are tax deductible include:

·         Gloves

·         Steel capped and rubber boots

·         Hi Viz vests

·         Wet weather gear

·         Clothing that is fire resistant

·         Heavy duty pants and shirts

·         Non-slip nurse’s shoes

·         Clothing with a UPF sun protection rating

·         Aprons or smocks, or overalls or boilersuits used to protect ordinary clothing.

Laundry and repair expenses

You can claim a deduction to wash, dry clean or repair clothing that is deductible. The ATO allows you to claim $1 a load if it only contains works clothes or $0.50 a load if the load has both work and personal clothes.

If your employer pays an allowance to look after your work clothes:

·         You must include it in your taxable income on your tax return.

·         You can only claim a deduction for what you actually spent.

Keeping records

It is important to prove what you spend to buy, wash or repair work clothes. You can do this by keeping receipts or diary entries when you wash work clothes at home.

The government reduced the ability to use negative gearing in its 2026 Federal budget. This means that from 1 July 2027 you can no longer offset rental losses from residential investments against other income unless they are eligible new residential builds.
But there is some good news. If you already have residential property investments, you can still use negative gearing until you sell them. The changes do not apply to property owned at the time of the 12 May 2026 budget announcement or if you buy a house before 1 July 2027. But after that date, negative gearing no longer applies to property bought after the announcement or 1 July 2027. However, you can claim any losses from residential investments from any future capital gains when you sell them. So you need a good accounting/recordkeeping system.
How the changes work
The changes make it more complex. They create a dual system where which rules apply depend on the purchase date of a property and its type.
Rather than offsetting rental losses against your income or wages, you can only deduct losses from:
•    Rental income.
•    Capital gains when selling residential property.
If your rental losses are more than both of these, you can carry them forward.
As a result, the new negative gearing rules increase the compliance and administrative responsibilities as you must:
•    Monitor when you buy a property to determine how negative gearing applies when you sell it.
•    Keep accurate records of rental losses for applicable properties so you can offset them against future capital gains when sold.
To complicate things further, negative gearing still does apply to a new build.
What is classified as a new build?
The new rules do not apply to eligible new residential builds. You can negatively gear these properties and claim a 50% discount on the capital gains when you sell them.
Currently an eligible new build includes:
•    An apartment bought off the plan before being constructed.
•    Any residential building built on vacant land.
•    Knocking down a single house and rebuilding a duplex in its place.
•    Living in a new property for less than 12 months before it is sold for the first time.
The following property types are not eligible:
•    A property recently renovated to include extra bedrooms.
•    Replacing an older house with a new house on the same land.
•    Living in a new property for more than 12 months before selling it for the first time.
•    Building a granny flat adjacent to an established home.
If you are a property investor or want to buy an investment property, talk to Ben about how the changes will affect you. He can help you make the most out of your investment.

In the 2026 budget, the government changed the 50% Capital Gains Tax (CGT) discount. So what does that mean for you? As of 1 July 2027, the discount will be assessable based on cost base indexation with a 30% minimum CGT due on any profits when you sell any assets.

What changes

The following are the changes affecting CGT:

1.      Buying or selling an asset after 30 June 2027 means that any profit you make is subject to a minimum 30% tax.

2.      Buying and selling an asset before 1 July 2027, you still receive the 50% discount.

3.      Buying an asset before 1 July 2027 and selling it afterwards (so your ownership sits across both sides of this date) means you can get the discount based on its market value up to July 1 and, after July 1, the capital gains are based on indexation so you pay a minimum of 30% in tax on the profit.

Note: The new CGT rules are not restricted to only real estate and apply to the gains on the sale of all assets.

Assets subject to Capital Gains Tax

In general, the new CGT rules apply to the following assets (this list is not exhaustive):

·         All real estate except the family home.

·         Shares and units when you sell them or receive a distribution (as long as it is not a dividend) from a managed fund.

·         Managed investment trust distribution payments that are not assessable and are capital gains. Your trustee will let you know if a discount for CGT applies.

·         Exchange traded funds when disposed of or sold even when you receive them from a distribution reinvestment plan.

·         Crypto assets unless they are a personal asset and then may be exempt. Crypto becomes a personal asset if its primary use is for day to day purchases.

·         Personal use assets if they cost more than $10,000.

Professional valuation

The Australian Taxation Office does not require a “professional valuation” to calculate the CGT owed if the rules only require a market value. But you do need a “comparative value” and, if it is real estate, a letter from a real estate agent.

Keep in mind though that if the Commissioner questions your market value, you need to prove that the value you submitted is better than the Commissioner’s valuation.

Getting the timing right

It is important to get the timing right when selling an asset. It is better to profit from your assets in a year where your income is lower than usual. For example, in a year you have capital losses. This minimises your tax on the profit from the sale of an asset. This is important with the minimum CGT changing to a minimum of 30% in 2027, especially if you are planning to retire soon.

You also need to consider if the new CGT system will be more advantageous than the 50% discount. This is actually possible when you own the asset for many years. It also applies if the shares you own only rise a little in value with inflation. If so, then indexation may give you a better result.

The new CGT rules can make selling assets complex, which may affect your financial planning. Call us. Make an appointment to discover how to make the best of the new CGT rules.

 

Original article

Budget Changes to CGT Discount

So, what do the Budget changes to the CGT discount mean to you?

And what these changes will do is to allow any capital gain that accrues up to 1 July 2027 to continue to be entitled to the 50% discount – but thereafter the assessable gain will be worked out under an indexation base indexation rule and gain itself will be subject to a minimum 30% tax rate.

But firstly, here are the specific rules regarding the proposed changes in a nutshell:

Firstly, if you buy and sell an asset after 30 June 2027, the new rules apply (ie your gain will be calculated by reference to inflation based indexation only and a minimum 30% tax rate will apply to the gain).

Secondly, if you buy and sell an asset before 1 July 2027, the existing 50% discount rules will continue to apply and there is no minimum tax rate.

Thirdly, if you buy an asset before 1 July 2027 but sell it after that date (ie your ownership of the asset straddles this key date), then you will get the discount up to the asset's market value on 1 July 2027 and thereafter the gain is calculated under indexation and a minimum 30% tax rate will apply to the gain.

Importantly, the new rules apply to all assets (eg. shares) – and not just real estate.

A fundamental feature of this rule is as it applies to the straddling situation, is the need to determine the asset's market value as at 1 July 2027. This will be easy in some cases (eg publicly listed shares on the ASX). But harder in other cases – including real estate.

But here it is worth noting that the ATO currently takes the view that you do not have to get a professional valuer where the CGT rules requires a market value – and that a "comparative valuation" will do instead (eg. comparative sales of similar houses in the neighbourhood (and perhaps supported by a real estate agent's letter).

However, if the Commissioner challenges your market valuation then the onus will be on you to show that your valuation is better than the Commissioner's valuation.

Another key thing to bear in mind is whether the new indexation system will give you better advantage than the discount – which is possible, especially if you have owned the asset for a long time. Also, if shares you have owned on the share-market have only risen a little with inflation, indexation may also give a better result.

The timing of sale is also important because it is better to realise a capital gain in an income year in which your other income is low (or you have capital losses or a tax loss) – so that you therefore pay less tax on the gain. And with the minimum tax rate of 30% applying from 1 July 2027, this is an important matter – especially if you are considering retiring in the near future.

Suffice to say, these CGT discount matters are ones on which important planning decisions can be made. So, make an appointment to see us to discuss how they apply to your assets.