Property Investment Wise

Property Investment Strategies for Australian Property Investors with Tracey Lunniss

Understanding Capital Gains Tax

January 19, 2010 | admin | Comments 0

myf-013 For starters, as most people are aware, there is no Capital Gains Tax on your principal place of residence. The Capital Gains Tax laws relate to properties investment income or properties from which you intend to derive an income.

* The first and foremost point to understand about Capital Gains Tax is that it is a tax only relative to itself. In other words, if you had a loss with Capital Gains Tax in this financial year you could not expect to have the loss written off against your income from other sources, personal or investment. Capital Gains Tax can only be written off Capital Gains Tax. If you made a loss this year with your property investment and then a gain with your property investment next year, then next year you could reduce the profit by the loss from this year and be taxed on a lower amount next year.

* Another point to understand is the rate that Capital Gains Tax is charged. Although from the point of view of writing a gain against a loss regarding capital gains and not using it to write down any other income, when all your income is tallied up, that is when the rate of tax is assessed. Your Capital Gains Tax is taxed at the marginal rate that your total income amount falls into.

In calculating your Capital Gains or Loss all dates need to be accounted for and have relevant documentation regarding cost of purchasing and selling the property. Any true expenses of purchasing and selling the property form part of the overall expenses of calculating a capital gain or a loss on the property.

Points to remember

The date of purchase and the sale of the property is the date on the contract not the date of settlement
To be eligible for the 50% method of Capital Gains Tax you must own the property for 365 days (a full year excluding the purchase and sale dates) and it must be owned by either an individual, a complying superannuation entity or a trust (this exception only applies to property sold after 21 September 1999).