How do I do that?
The simplest way is to hold onto assets for at least 12 months. If you do, you only have to pay CGT on half the gain you've made, which gives a taxpayer on the top marginal tax rate of 48.5 per cent, an effective CGT rate of 24.25 per cent.
David Shirlow, a division director with Macquarie Bank, says it can also make sense to time sales of profitable investments for those years you have a lower income. If you're near retirement, for example, or planning a year off work, you may be able to reduce your CGT rate by selling in that year. (However, Shirlow cautions that decisions about selling investments should never be driven by tax.)
At this time of year, the main strategy being touted is to realise some capital losses to offset your gains.
How does that work?
Let's say you've sold an investment property this year for a $50,000 profit. Unfortunately, you're also sitting on some Telstra shares you bought when T2 was floated and some AMP shares you received when the company demutualised. If you sold both shareholdings, you'd realise a $10,000 loss.
As things stand, you're looking to pay CGT on the full $50,000. If you're on the top marginal tax rate of 48.5 per cent, that means a tax bill of $12,125. If you're on the 31.5 per cent tax rate, it's $7875.
However, if you sold your shares, you could deduct the $10,000 loss from your gains before CGT was calculated, and pay CGT on the net $40,000 gain. For the top taxpayer that would be a saving of $2425, and for the average taxpayer, $1575.
Note that your capital losses are deducted from your capital gains before the tax is calculated. Shirlow says this is because capital losses can only be used to offset capital gains. If you don't have capital gains to offset, the losses must be carried forward to future years.
How is CGT calculated?
When you buy assets on which CGT may eventually have to be paid, you need to keep a record of the cost base of the asset. In very simple terms, this is the purchase price plus costs like brokerage, stamp duty, entry fees on managed funds, valuation fees, advisory fees, legal fees and so on. Money spent improving the asset can also be included in the cost base, although in some instances you'll be required to treat the improvements as a separate CGT asset.
It's well worth your while to get professional advice on what should be included.
You'll also need to calculate the sale value or capital proceeds from the investment. This is basically the price you sell for, minus any disposal costs such as brokerage, real estate agents' commissions, and so on. The gain is the difference between the cost base and capital proceeds.
If you have owned the asset for 12 months or more, half the net gain (after deducting any capital losses) is then added to your income for tax purposes. If you've owned it for less than 12 months, you must include the full gain. The tax on the profit is then calculated as part of your total tax bill.
What happens if I have participated in a regular savings plan or dividend reinvestment plan?
You need to take even more care with your records, as each new investment will have a separate cost base. The good news: if you decide to sell part of your total holding, you can choose which units or shares you are selling to give you the best tax outcome.
Can I sell my AMP and Telstra shares, then buy them back in the hope they'll come good?
This is dangerous, as you could fall foul of the anti-avoidance provisions of the Tax Act. This is what's known as a wash sale, and you run the risk of the Australian Taxation Office arguing you made the transactions simply to avoid paying tax. Obviously, though, you can decide to reinvest in these stocks later on.
Further reading: 
