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What You Need To Know About Capital Gains Tax

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If you plan to buy and sell an investment property, you are required to pay capital gains tax or CGT on sale of investment property. You must understand this first before you buy or sell investment property. 

What is CGT?

A CGT (Capital Gains Tax) is a required tax to pay on any capital gain earned on the sale of an investment asset such as a property. This applies to assets acquired after 19 August 1985.

What is capital gain?

A capital gain tax is made when a profit is acquired from the sale of an investment. If the sale price exceeds the original purchase price of the property. 

Now, if you sell your investment and it’s less than the purchase price, you have made a capital loss. You must speak to your Accountant to work out your net capital gain or loss. 

How to Calculate CGT? 

Interestingly, calculating CGT is easy. In a sale of a single investment, just need to subtract the amount originally paid for it (along with all associated costs like legal fees and stamp duty). The remaining amount will be your capital gain. If you make a loss, you will not be taxed.

You may be eligible for a 50% reduction of the CGT payable if you acquired the property after 21 September 1999 and owned it for at least a year before deciding to sell, and if the property was purchased by an individual, trust, or complying superannuation entity. 

What are the Exemptions? 

Investment properties that were sold are subject to CGT. However, the case is different if you sell your primary residence. As long as you have never rented it out, CGT is exempted. 

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