What is capital gains tax and how is it applied?
In Australia, as in many other countries, capital gains tax applies when you sell an investment property for a profit. The good news is that this is a tax that can be “managed” or minimised because it is levied at your marginal rate of tax in the year that the property is sold. In other words, if you sold your property during a year when you had no income, you could dramatically reduce your capital gains tax.
This is something that self employed people and business owners may be able to do.
Obviously the timing of the sale of the property will be an important consideration here too.
There are a number of ways of reducing the capital gains tax applicable and therefore I have 2 important suggestions for you:
- Firstly, keep good records about the property from the time you first buy it and,
- Secondly, consult your accountant about the best strategy to follow to minimise the capital gains tax applicable BEFORE you put the property on the market.
I have a simple capital gains tax calculator which you may like to check out as a guide. Remember though, to get an accurate calaculation of your potential liabaility, consult your accountant.
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Warm Regards,
Hans Jakobi - Australia's Wealth Coach