Capital gains tax is a tax on the profit made from selling or disposing of an asset for more than its cost base. It applies to business assets, investments, property and shares.
Capital gains tax is triggered when you sell or dispose of a capital asset at a profit. The gain is calculated as the difference between the sale price (capital proceeds) and the cost base (original purchase price plus acquisition costs plus capital improvements). CGT rules vary significantly between countries. In Australia, individuals and trusts receive a 50% CGT discount for assets held longer than 12 months, and there are four specific small business CGT concessions. In the UK, Business Asset Disposal Relief provides a reduced rate. The US has preferential long-term capital gains rates for assets held over one year. CGT is particularly important when selling a business, as goodwill and other intangible assets are CGT assets. Proper record keeping from the date of acquisition is essential for calculating your cost base accurately. SortBooks helps by correctly categorising asset purchases, improvements and disposals in Xero, maintaining accurate records for future CGT calculations.
SortBooks helps with the bookkeeping behind capital gains tax (cgt) by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing capital gains tax (cgt) by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
The cost base of an asset is its original purchase price plus any acquisition costs, improvements and other allowable amounts. It is used to calculate capital gains or losses on disposal.
Depreciation is the accounting method of allocating the cost of a tangible asset over its useful life. It reduces taxable income each year and reflects the asset's declining value.
An asset is anything of value that your business owns or controls. Assets are listed on the balance sheet and include cash, receivables, inventory, equipment, property and intangible items.
Goodwill is an intangible asset representing the excess amount paid for a business over the fair value of its identifiable net assets. It reflects the value of brand, reputation and customer relationships.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.