According to the Australian Taxation Office, capital gains tax is the duty you have to pay on any profit from assets like your property investment and is a part of the annual income tax return. So it is not a different kind of tax, but just an element. You are taxed on your net profit at your marginal tax rate.
Net profit is as calculated as follows:
Total capital gains minus total financial losses for the year and any net financial losses that
you did not deduct in earlier years minus any CGT (Capital Gains Tax) reductions and small
business CGT concessions for which you qualify
What does this mean for the profit of your property investment?
In Australia, CGT will have to be paid when there is profit on assets. And this does not mean property investment only. That means that the sales of precious metals, bonds and shares fall under this taxation and forms part of your income tax.
Actually, it is quite okay if you have to pay capital gains tax on your property investment as it means that you made a profit, which you bought it for in the first place. If you bought a house during the tax year and you were able to sell it in the same year with a significant profit then you will be taxed for 50%. However, if the property is older than 1 year then you will qualify for a discount and the percentage will come down to approximately 15%. If you use the property investment as your main family home then CGT will be exempted.
Capital gains tax in Australia will have to be paid when you sell assets at a profit. Actually it feels really good that you can pay the tax, because it means that you have made a profit which was your aim when started your property investment. But of course there are ways and means of keep the tax amount as low as possible.
It is interesting to know that there is no time limit to deduct unapplied net capital losses on your property investment. This might come handy when in certain years your capital gains are quite high and you would like to get an interesting tax benefit. The only time that you do not need to pay any capital gains tax on, for instance, your investment property when this property was purchased before 1985.
Be careful though when you decide to use your property investment as a gift. For instance, you decide to give the property to one of your siblings. The revenue service will assume that you have received the market value of the property for it when you gave it away. There are only a limited number of reasons offered when you would like to deduct CGT for a property investment. Even if you have property investment in another country you will have to pay, whether you like it or not. For more information about all the in's and out's of capital gains tax, seeking advice from a property investment advisor is strongly encouraged.
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