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Capital gains tax (CGT) is not a separate tax, but a component of income tax. This means that capital gains are taxed at
the rate that applies as a result of the level of your other taxable income. Example Fran, an Australian resident, made a gross capital gain of $2,000 in 2004-05. As Fran held these assets for more than 12 months,
she is entitled to the 50% CGT discount. Her net gain to be included in her taxable income is therefore $1,000 (50% of $2,000).
Her taxable income from all other sources was $55,000. The tax rate which applies to income between $21,601 and $58,000 for
2004-05 is 30 cents per dollar plus Medicare levy of 1.5 cents per dollar. The tax and Medicare levy which applies to Fran's net capital gain is $315 (31.5 cents x $1,000).
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In Australia, a taxpayer's income is taxed progressively. Broadly, this means that as you earn more income your average
tax rate rises. Progressive taxation means that higher income earners pay more tax than lower income earners. This is achieved by taxing
a range of income brackets as a set percentage or cents in the dollar. These income brackets are called tax brackets.
The following tables detail the tax brackets of our progressive tax system for the financial years ending 30 June 2005
and 30 June 2006. The rate of tax within these brackets is called the marginal rate of tax. For Australian residents, the
first tax bracket, from $0 to $6,000, has a zero marginal rate of tax. Tax is applied to every dollar after this figure. This
tax-free amount is called the tax-free threshold. These rates apply to individuals who:
Taxable income Tax on this income $0 – $6,000 Nil $6,001 – $21,600 17c for each $1 over $6,000 $21,601 – $58,000 $2,652 plus 30c for each $1 over $21,600 $58,001 – $70,000 $13,572 plus 42c for each $1 over $58,000 Over $70,000 $18,612 plus 47c for each $1 over $70,000
Taxable income Tax on this income $0 – $6,000 Nil $6,001 – $21,600 15c for each $1 over $6,000 $21,601 – $63,000 $2,340 plus 30c for each $1 over $21,600 $63,001 – $95,000 $14,760 plus 42c for each $1 over $63,000 Over $95,000 $28,200 plus 47c for each $1 over $95,000 The above rates do not include the Medicare levy of 1.5%. Tax offsets reduce the tax payable. Tax offsets based on taxable income levels apply to: Other tax offsets apply to people with dependants, those living in remote areas and those who receive particular types of income or incur
particular expenses. If you are a non-resident for the full year, the following rates apply:
Taxable income Tax on this income $0 – $21,600 29c for each $1 $21,601 – $58,000 $6,264 plus 30c for each $1 over $21,600 $58,001 – $70,000 $17,184 plus 42c for each $1 over $58,000 Over $70,000 $22,224 plus 47c for each $1 over $70,000
Taxable income Tax on this income $0 – $21,600 29c for each $1 $21,601 – $63,000 $6,264 plus 30c for each $1 over $21,600 $63,001 – $95,000 $18,684 plus 42c for each $1 over $63,000 Over $95,000 $32,124 plus 47c for each $1 over $95,000 Non-residents are not required to pay the Medicare levy. If you are under the age of 18, and receive ‘unearned’ income (for example, investment income), special rates
apply. Read Income of individuals under the age of 18.
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