Are you thinking of selling your investment property? Don’t forget to factor in the cost of Capital Gains Tax (CGT). CGT is generally payable when you sell a property that is not your main home of residence.
Your main residence is defined as one where:
• You and your family live
• Your personal belongings are
• It is your electoral roll address
• Your mail is delivered there
• All services are connected such as gas and electricity, etc.
So, if you wish to dispose of a property that you have purchased (and have tenanted), inherited, received as a gift or won as a prize that is not your main residence you will be liable for CGT.
According to the Australian Taxation Office, CGT is classified as: “…CGT is the tax you pay on any capital gain you make and include on your annual income tax return.
There is no separate tax on capital gains, it is merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate.”
It is worked out by the following method:
Your net capital gain is: your total capital gains for the year
minus your total capital losses (including any unapplied net capital losses from previous years) minus any CGT discount and CGT small business concessions to which you are entitled.
There are ways to reduce your liability by offsetting your capital losses from other properties and assets.
