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Capital Gains Tax on Property

Capital gains tax in Australia applies when a profit is made on the disposal of a capital asset that was acquired after 20 September 1985 (i.e. usually on the sale of a property investment or other asset).

  • The ‘profit’ when calculating capital gains tax is included in your income tax and you will be taxed at your marginal tax rate.
  • In general, the main exemption is on your main residence i.e. the home you live in.

Capital gains tax can also be applied when you ‘give’ the property away and in some circumstances, when you inherit a property. For more details about the rules surrounding capital gains tax and property investment, visit the Australian Taxation Office site.

Exemptions

The most common exemption to capital gains tax on property is when you live in the property you are disposing of. For a residence to be fully exempt from capital gains liability:

  • The dwelling must have been your home for the whole period you owned it;
  • You must not have used the dwelling to produce assessable income; and
  • Any land on which the dwelling is situated must be 2 hectares or less.

However, there are some exceptions to these rules.

  • If you have lived in your principle place of residence for a reasonable time, you can rent it out for up to 6 years without it affecting your Capital Gains Tax liability, as long as you have no other principal place of residence during that time. 
  • If you are moving between residences or if you are living in one house while building a new one.
  • Inherited properties also have some exemptions depending on the circumstances.

For more information please contact the tax office or your accountant.

Capital Gains Tax and your property investment decisions

  • It’s important to know the impact of selling your asset before you purchase. Investment property is not often quick to sell and your financial situation at the time of the sale will impact the tax that you pay.

  • When estimating the overall return on your investment property, the taxes must also be considered. Be aware, that the sale of any asset, including shares, incurs capital gains tax.

  • Buying and selling property incurs significant costs, especially for assets purchased post September 1985.

  • You do not always need to sell an investment property to buy another. You can leverage against the increased value of the existing property, to purchase another.

Your resi home loan specialist can help you optimise your equity opportunities. For more information call 136 126 today or ask us a question online.