Capital Gains Tax is my friend

property investment

Capital Gains Tax is my friend
By Jeff Banks

Property transactions generally attract capital gains tax when a property is sold.

Many people believe capital gains tax or CGT is an extra tax imposed on taxpayers who sell investments, particularly property. This is not true. CGT is a method of calculating what income needs to be included in your income tax return.

CGT generally applies to transactions of a capital nature that occur outside a 12 month period (subject to the intention of the taxpayer). Profit on the transaction is calculated in what might be termed a normal manner and then a 50% general exemption is applied, reducing the profit in half and that amount is included in your tax return and tax is levied at your marginal rate.

Given most property transactions involve large numbers a CGT event may see you pushed well into the top marginal tax rate of 46% but if you have no other income in the year in which the profit was derived, the first approximately $20,000 of the capital gain would be tax free, the next $20,000 would be taxed at 19% and so on up to $180,000 where the top marginal tax rate kicks in. If a property is in joint names the overall taxation is spread across two lots of marginal taxation, which in a year where both owners have no other income more than halves the taxation liability.

Even more reduction in overall taxation could be enjoyed where a trust is used to own the property as the trustee has the power to use multiple beneficiaries and their lower marginal tax rates to reduce the overall taxation liability.

At worst the tax payable on a capital gains tax profit is 23%. This equates to the top marginal rate divided by 2 to allow for the 50% general exemption.

Unlike many other property sales and management organisations, Property Portfolio Solutions has me, a property taxation expert with in excess of 40 years of experience here to help clients navigate the world of property investment.

Our catchcry is “Your legacy is Our inspiration” and our approach based on what inspires you, will make your legacy seem so much easier to achieve. We are easily contacted by going to the home page on our website where the start or even the continuation of your property portfolio is made simple.

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