Investment in property brings numerous financial incentives such as rental income and tax benefits; however, capital gain is generally the most significant financial reward. Capital gain is the increase in value of the property over time and in Australia's strong property market capital gain is virtually assured for any property kept for the medium to long term.
Capital gain is an attractive reason to purchase property for investment; however, it is important to note that capital gains tax can affect the amount of profit made. Capital Gains Tax (CGT) is only paid if the property is sold.
Generally the amount of capital gain - i.e. the amount the property is sold for minus the amount it was purchased for - is added to the taxable income and taxed at the marginal tax rate. If the property is owned for more than 12 months (excluding the period of purchase and sale) then only 50% of the capital gain is added to the taxable income.
Capital Gains Tax does not apply for the primary place of residence - so your family home is exempt. The family home can also be rented out for a period of up to 6 years and still remain CGT exempt. Any property purchased prior to September 1985 is also exempt.
Taxation laws are complex and individual circumstances may mean investors are eligible for additional exemptions. Before selling an investment property, all investors should speak with a property specialist to understand how the taxation laws apply to their individual situation.
ParkTrent's professionals are available to help you understand how to maximise your tax benefits at every step of the investment property process.
For more information regarding Capital Gains Tax on Investment Property, please contact our Customer Service and Sales team on 1800 652 224 or email contact@parktrent.com.au
