CGT or Capital Gains Tax is the tax charged on any capital gains that arise from the sale or disposal of any asset bought or acquired after September 1985. It is not a separate tax in its own right. Rather a ‘net capital gain’ is included in your taxable income and taxed at your marginal tax rate.
A capital gains tax event is any transaction or event that results in a capital gain upon the disposal of an asset. The term ‘asset’ includes shares, vacant land, holiday homes, a business premises or of course, a rental property or investment property. A capital gain (or loss) is the difference between the purchase price and selling price of a particular asset. The fees for buying, such as stamp duty, and the fees for selling, such as agent’s fess, are added to the cost base. For example, if a property is purchased at a total cost of $500,000 (including fees) and sold for $720,000 (less $20,000 in agent’s fees), the tax will apply to the $200,000 gain. There are a few exceptions to paying capital gains tax. The main one being that it does not apply to the sale of your principal place of residence – that is, your own home. Holding an investment property for more than twelve months may mean that the owner is eligible for a 50% discount on the capital gains tax payable.
The above is general information on capital gains tax. If you’re considering buying or selling property, it’s advisable to speak to a good accountant that understands property before you buy.
