Property Investment and Capital Gains Tax

As a property investor, there are a range of costs and factors that will have significant implications for your finances and overall investment strategy. Among the most important of these considerations is capital gains tax (CGT), which can make a big dent in your bottom line. What is capital gains tax? CGT tax was introduced in Australia in 1985, so it applies to assets acquired after that date, including most property other than your primary place of residence. CGT is the tax you pay on any capital gain (profit) you make through the sale of an asset. A capital gain is an amount you receive for selling an asset, minus the amount you paid to acquire and maintain it. Capital gains or losses are added to your assessable income in the financial year in which you sell your property, and will increase or decrease the amount of tax you pay on your tax return. What is the CGT discount? Australian residents who hold a property for more than 12 months are entitled to a 50% discount, and for superannuation funds, the discount is 33.3%. Companies and non-residents are not entitled to any discount. There is also an additional discount of up to 10% for Australian individuals who provide affordable rental housing for low-to-moderate-income earners, increasing the CGT discount to 60%. What is the CGT rate? Because capital gains form part of your taxable income, the tax rate you’ll pay is the same as your income tax rate for that year. The amount of CGT you pay depends on many factors, including how long you have owned the property, if and when you have lived in the property, and whether you’ve made any capital losses. It’s a complex tax subject to dozens of rules and exemptions, so it’s important to seek professional advice from your accountant in order to understand your individual situation. Should I hold or stay? There’s no doubt the lure of fast money can be a powerful incentive. But holding onto an investment property can allow you to access capital growth and build your portfolio, thereby improving your financial position. The Property Mentors CEO Luke Harris said the decision to hold or sell was unique to each investor and property. “There’s no fast-track to wealth,” he said. “What works for one investor could turn out to be a total disaster for another.” How The Property Mentors can help Whether you are a first-timer or an experienced investor ready to take your results to the next level, we can help. Our mentors are successful property investors in their own right, who will guide you through every step of your investment journey and help you achieve long-term financial success. Contact us today to put in place a successful plan for your portfolio in 2022.