If you’re a property investor, then knowledge of Capital Gains Tax (CGT) is a must for maximising profits. Capital Gains Tax (CGT) hits hard on those hard-won profits from property investing. However, expert insights and clever strategies can help you save big on your profit.
In this guide, prepared by our experts, you’ll explore the basics of CGT, how it works, loopholes to exploit and expert insights to save big on your profit.
Additionally, we’ll share crucial information about trusted tax advisors and tax accountants in Castle Hill to help you maximise profits and keep more.
What Is Capital Gains Tax?
CGT applies to the profit, or capital gain, that you realise when selling a property. Specifically, you calculate it as the sale price minus the purchase cost, improvements, and holding expenses. Moreover, it only triggers on sale, not on purchase or rental income, which sets it apart from income tax. For investment properties, therefore, full profits are typically taxable unless exemptions apply, such as the main residence rules.
Types of Capital Gains
There are two main types:
Short-term capital gains (STCG) arise from properties held under 12 months in Australia; these are taxed at slab rates or a 20% flat rate.
long-term capital gains (LTCG) apply to holdings over these periods. For example, Australia provides a 50% discount for individuals.
Expert Strategies To Minimise Taxes On Property Sales
Hold for 12 Months: Holding the property for more than 12 months allows you to get 50% CGT discount.
Enhance the cost base: Keep proper records of all acquisitions, ownership, and improvement costs. These documented expenses increase your cost base, lowering the capital gain.
Track all Costs Digitally: It is best to record all your expenses digitally using apps like Google Sheets for easy audits.
Main Residence Exemption: If qualified, you might get a complete exemption from paying capital gains tax on your primary home.
Reporting Requirements
File CGT in your tax return for the sale year via myTax or a reliable accountant like Prowess Business Advisors. Report even if no tax due. Advance payments avoid penalties; the ATO flags late filers. Complex? Get professional help today!
Save Big On Capital Gains Tax With Prowess Business Advisors
At Prowess Business Advisors, a reliable tax accountant in Parramatta, we simplify accounting, tax, and financial management so you can focus on growing your business.
We strategically plan to minimise your tax liabilities while ensuring full compliance with the Australian Taxation Office.
Our client-centric approach ensures that you receive personalised, expert-driven solutions tailored to your needs.
Whether you want a tailored taxation solution for your business or tax return benefits, we’re your supporting partner.
Contact Prowess Business Advisors today and save big on Capital Gains Tax!
Frequently Asked Questions
1. How to avoid or reduce capital gains tax on property sale?
You can reduce Capital Gains Tax(CGT) on a property sale by holding the property for at least 12 months to get 50% discount, offsetting gains with capital losses, maximising the cost base with expenses and hiring a taxation expert like Powess Business Advisors.
2. What is the 50% CGT discount, and who qualifies?
The 50% Capital Gains Tax(CGT) is a tax concession for Australians that reduces the capital gain on assets by half for taxpayers who hold the asset for over 12 months.
3. How much capital gains tax on rental property in Australia?
Capital gains tax(CGT) on rental property is not a separate tax. It is added to your yearly income and taxed at your marginal rate. Individuals who hold a property for over a year typically receive a 50% discount on their gain.