What is capital gains tax?
A capital gain or loss from a dwelling is ignored for CGT purposes if the dwelling (e.g. a home, an apartment/flat, a strata title unit) was your main residence throughout the ownership period. However, a capital gain or loss may still arise if the dwelling was also used for income-producing purposes. If this arises, you might be entitled to obtain a partial CGT exemption. Where there is a capital gain, you might be entitled to a 50 percent discount on the amount of the capital gain for CGT purposes provided that you have owned the CGT asset for at least 12 months. Go to the Australian Taxation Office website for more information on CGT.
Capital gains is the difference between what a property sells for and the “adjusted basis” in the property. When investment property is purchased, the purchase price becomes the initial cost basis. If you make capital improvements to the property, the cost of those improvements will increase the basis in the property, adjusting the basis upwards. Depreciation is a benefit to owning investment property which allows for a yearly deduction of a portion of the value of the property improvements. Click here to calculate your capital gains tax. Depreciation cannot be taken on land. Any depreciation taken is a reduction in the basis of the property.
