www.vijaygandhi.comIn simple terms, Capital gains refers to the profits that a fund or individual makes on the sale of an asset. Capital Gains Tax (CGT) directly relates to the income tax you need to pay on any net capital gain (including property income) you earn and declare on your annual income tax return.

When Capital gain is applied to any real estate that you own that is not your primary place of residence such as investment properties or holiday homes, CGT is calculated and applied. Your primary residence (or your family home) remains exempt from CGT.

Although many property investors understand the simplicity of CGT, often the ‘grey area’ of determining which property investors can declare as their primary or family home creates confusion and often leads to some misunderstanding of the CGT Laws; especially when preparing your income tax return.

Like with any asset that attracts CGT, any income received from any investment property must be calculated and included as part of your annual income. When it comes to claiming your CGT, you must make a clear decision on which property you intend to claim as your PPOR, as you can only claim one, and at this point, often common misunderstandings come into play.

Once you have decided on which property to claim as your PPOR, any other property you own, regardless whether it is currently rented out or not, it will accrue CGT. The value of that property (or collective values of more than one investment property) generate the cost base upon which the investment return/s are calculated for the total gain value.

According to the Founder and Owner of ONYX Finance, Greg Clough, there are a range of factors that must be taken into careful consideration to best position any property investor during the CGT claim process; whilst reducing confusion and remove any common misunderstandings. These include:

  • The date when the property was purchased
  • The length of stay that you may have occupied the property yourself (You can move out of your PPOR for up to six years and still maintain an exemption)
  • A range of genuine claims of you PPOR – such your intent of residency including relocating for work (a six month overlap is accepted but must be carefully planned in accordance with the timing regulations).

For more information and professional advice on ways CGT can best work for your property investments, call Greg Clough on 1300 1400 15


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