Capital gains tax (CGT) is a tax on the profit you make when you sell an asset, including a property. In Australia, when you sell a property, you may be liable for CGT on any capital gains you make. Here's a guide on how CGT works for property sales in Australia:
What is Capital Gains Tax? CGT is a tax on the profit made from the sale of an asset, including property. It is calculated based on the difference between the cost base (the original purchase price plus any associated costs such as stamp duty, legal fees, and renovation costs) and the property's sale price.
When is CGT Applicable? CGT is applicable if you sell a property that is not your primary residence or have used it for income-producing purposes (such as renting it out). If the property is your primary residence, you may be eligible for the main residence exemption, so you may not have to pay CGT.
How is CGT Calculated? CGT is calculated based on the capital gain you make from selling your property. You can deduct any costs associated with buying and selling the property (such as legal fees and real estate agent fees) from the sale price to arrive at the capital gain. You may also be eligible for a 50% discount on your capital gain if you have owned the property for over 12 months.
What is the CGT Rate? The CGT rate is based on your income tax rate, ranging from 0% to 45%. If you are eligible for the 50% discount, you will only pay CGT on 50% of the capital gain.
How to Report CGT? You need to report any capital gains or losses on your tax return in the year that you sell the property. You may need to obtain a capital gains tax clearance certificate from the Australian Taxation Office (ATO) to confirm that you have met your CGT obligations.
Seeking Professional Advice: Selling a property and calculating CGT can be complicated. It is recommended that you seek professional advice from a tax accountant or financial planner to ensure that you understand your obligations and can minimize your CGT liability.
In summary, when you sell a property in Australia, you may be liable for CGT on any capital gains you make. The amount of CGT you pay depends on various factors, such as the time you have owned the property, the cost base of the property, and your income tax rate. Seeking professional advice can help you understand your CGT obligations and minimise your CGT liability. TidyTax can assist with CGT tax on your tax return, book an appointment with TidyTax qualified tax accountant based in Australia.