Capital gains tax or CGT is commonly imposed in Australia and is part of one’s income tax. This particular tax is levied against the selling of a real estate property and other capital assets. Basically, it is levied on profits gained when one disposes of an asset purchased after September 20, 1985.
When selling a home, the profit made above the cost of buying and maintaining the residential property is considered a capital gain.
It should be noted, however, that people are not required to pay CGT if they sell the home they live in. This is part of the main resident exemption rule.
Basically, only an investment property or a second property is subject to capital gains tax. As an example, when one sells their holiday house they need to report the capital gain or loss in his real estate after signing a contract to sell their investment property. If the contract is signed in June 2017, the capital gains tax need to be included in the 2016-2017 tax return.
How to Calculate CGT
When selling an investment property, the capital gains tax is calculated based on the sale price minus the expenses or what is known as the cost base. The cost base refers to the overall sum covering the original purchase price, incidentals, ownership and title costs less any government grants and depreciable items. The incidental costs include stamp duty, legal fees, agent fees and advertising fees while ownership costs cover land tax, rates and maintenance and interest on one’s home loan. The title costs, meanwhile, cover the legal fees related to organising and defending one’s property title.
Any gain made on the sale of that asset gets included in one’s assessable income during the financial year the asset was sold. When a contract is involved such as in the sale of a real estate property, CGT is assessed from the date the contract is signed and not during the settlement date. In the absence of a contract, CGT is assessed when the person ceases to be the owner of that asset.
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By Wendy Chamberlain
Copyright 2018 | All Rights Reserved
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With a passion for all things real estate spanning 18 years, Wendy loves that her role as a Buyers Advocate gives her buyers an experienced voice they can trust when it comes to negotiating to purchase something as important as their new home or investment. Wendy considers it a privilege to be asked to help others realise such an important goal as home ownership and to be trusted with that honour. Get in touch today via www.FollowWendy.com for a no obligation chat about how Wendy can work with you and help you save time and money to secure your new home sooner.
