A Comprehensive Guide to Understanding Capital Gains on Property: When it comes to understanding capital gains on property, there are a few key concepts that you need to be aware of. In this comprehensive guide, we will break down everything you need to know about capital gains tax on Australian property. We’ll go over what qualifies as a capital gain, how to work out your capital gain, and the different ways you can reduce or avoid paying tax on your profits. So whether you’re a first-time investor or you’re just looking for a refresher, read on for everything you need to know about capital gains on Australian property!
What Is Capital Gain?
First off, let’s define what qualifies as a capital gain. A capital gain is the difference between your purchase price and the sale price of an asset. In this case, we’re talking specifically about property assets – any type of land or building that you have bought and then sold for more than you paid for it. If you’ve made a profit on your investment, then you will be liable to pay tax on that amount. That being said, there are some exceptions where no tax may be payable (see below).
Working Out Your Total Capital Gains
Now that we know what counts as a capital gain, let’s talk about how to work out your total capital gains. This can be done by subtracting the original cost from the sale price of the asset. This is also known as the “net capital gain”. For example, if you bought an apartment for $400,000 and then sold it for $500,000, your net capital gain would be $100,000 (the difference between what you paid and what you sold it for).
Reducing Capital Gain
Once you’ve calculated your net capital gain, there are a few ways that you can reduce or avoid paying tax on it. The first option is to offset any losses from other investments against your gains. For example, if you had another property that incurred a loss of $20,000 in the same financial year that you made a profit on the sale of this property, then your taxable amount will be reduced to $80,000. Additionally, you can take advantage of capital gains tax concessions – depending on your situation, you may be able to receive a discount of up to 50% on your taxable gain!
Keeping Records
Lastly, it’s always important to keep accurate records and receipts of any investments that you make so that you can prove the cost base for tax purposes if necessary. This includes information about when you purchased the asset and what the purchase price was. Keeping accurate records will also help you track losses against gains in order to reduce or avoid paying capital gains tax.
We hope our Comprehensive Guide to Understanding Capital Gains on Property has been helpful in understanding more about capital gains on Australian property! As always, it is best to book us in for a free consult to get advice tailored to your specific situation. Good luck!
