Are you selling a property and confused about capital gains tax (CGT)? You’re not alone. Many people struggle to understand how CGT affects their real estate transactions. Let’s break it down.
First, how much do you need to pay in CGT? Some think it’s a flat 30% or 40%, but that’s not correct. CGT isn’t a separate tax with a fixed rate. The amount you pay depends on the assessable gain, which is the taxable part of your profit which is affected by how you’ve used the property over the years.
After calculating the assessable gain, taking into account any discounts or concessions, this amount is added to your other income—whether from work, investments, or other sources. The total is taxed at your marginal rate. However, if the gain is made by a company, super fund, or trust, different rules and concessions apply.
Another common question is about the timing of CGT payments. The tax is triggered by the contract date, not the settlement date. This could mean you need to report and pay CGT in one financial year, even though you won’t receive the settlement funds until the next. Be aware of contract dates—they’re also important for qualifying for the CGT general discounts for holding the asset for more than 12 months.
Now, what about your home? Do you need to pay CGT when selling your own house? The answer depends on the property’s history—whether it was rented, left empty, or used for a home based business. If you bought the house, lived in it the whole time, and then sold it, you’re unlikely to subject to CGT. But every situation is different, so it’s important to keep records and consult with a tax advisor.
In summary, while there are general CGT rules, the specifics can vary based on your circumstances. If you’re dealing with a complex situation—like multiple homes or a property portfolio—professional advice is recommended. A tax advisor can help you navigate CGT confidently.
I hope this post has clarified some aspects of capital gains tax. When in doubt, seek professional help to ensure you’re making the right decisions at tax time. Here’s to making informed choices and keeping your financial journey smooth.
Book a Discovery Call with Ryu at https://impalatax.com.au/discovery/
