Understanding Capital Gains Tax (CGT) for Homeowners

As we step into June, it's a great time for homeowners to get ahead on understanding Capital Gains Tax (CGT), especially if you’re considering selling your property in the next financial year.

Here’s a straightforward guide to how CGT works for property sales, including any exemptions or concessions that may apply.

What is Capital Gains Tax (CGT)?

CGT is a tax you pay on the profit (capital gain) made from selling an asset, such as an investment property. The gain is the difference between what it cost you to acquire the property and what you received when you sold it.

How CGT is Calculated:

1. Determine the Cost Base: This includes the purchase price, stamp duty, legal fees, and any other costs associated with buying and improving the property.
2. Calculate the Capital Proceeds: This is the amount you receive from the sale of the property.
3. Subtract the Cost Base from the Capital Proceeds: The result is your capital gain or loss.

CGT Discount:

If you’ve held the property for more than 12 months, you may be eligible for a 50% discount on the capital gain. This means you only pay tax on half of the profit. This discount is particularly beneficial for long-term investors.

Main Residence Exemption:

Your primary home (main residence) is generally exempt from CGT. However, this exemption does not apply to investment properties. If you have used your home to generate income (for example, by renting it out), you might have to pay CGT on part of the gain.

Temporary Absence Rule:

If you move out of your primary residence and rent it out, you can still claim it as your main residence for up to six years for CGT purposes, provided you don’t treat another property as your main residence during this period. This can be a valuable exemption for those who temporarily relocate or decide to rent out their home before selling.

Small Business Concessions:

If you’re a small business owner, you might be eligible for additional CGT concessions when selling a business property. These include:

• 15-year exemption: No CGT is payable if the property has been owned for 15 years and the owner is 55 years or older and retiring, or is permanently incapacitated.
• Retirement exemption: Up to a lifetime limit can be exempt from CGT when selling a business.
• Rollover concession: Allows deferral of CGT if a replacement asset is acquired within a certain period.

Record Keeping:

It's crucial to keep detailed records of all expenses related to the property to accurately calculate your cost base and claim all eligible deductions. Proper documentation helps in substantiating the cost base and any improvements made, which can significantly impact the CGT payable.

Why Choose Noble Avenue Real Estate?

At Noble Avenue Real Estate, we pride ourselves on our deep local knowledge and commitment to the community. Whether you’re buying, selling, or simply exploring your options, we’re here to help every step of the way.

Our innovative services like Noble Elevate ensure that your property stands out in the market, often selling for higher prices. With comprehensive marketing strategies and unparalleled customer service, we strive to make every real estate experience smooth and successful.

Final Thoughts

Understanding CGT can help you plan better and save money when selling your property in the next financial year. For tailored advice and further assistance, it is advisable to consult with a tax professional.

Navigating through the intricacies of CGT can be daunting, but with the right knowledge and preparation, you can maximise your benefits and ensure a smoother selling process. If you have any questions about CGT or need further clarification, feel free to reach out to our team at Noble Avenue Real Estate.

For more information and to find out how much your home is worth in the current market, visit nobleavenue.com.au/request-appraisal.