There are three main points to consider in calculating capital gains tax on your investment property:
a) The difference between costs that can be written off as part of negative gearing and those that form the ‘cost base’.
b) If you are an individual and have held the property for than 12 months, you are entitled to the Capital Gains Tax discount of 50% ie your profit is halved before tax is applied to it.
c) Capital losses can only be used to offset other capital gains for tax purposes. It is not possible to use capital losses to reduce taxable income from other sources.
Below is a worksheet that can help you calculate your capital gains tax on any property investment. Note this is an estimation only.
Important note: All costs included are costs that have not been claimed as part of normal annual tax return ie items cannot be claimed twice.
| A. |
Sale Price |
$
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| B. |
Purchase Costs |
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Purchase price of asset
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Stamp duty paid at purchase |
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Capital improvements |
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Other purchase costs |
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Other property costs not previously claimed such land tax, rates, etc. |
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| C. |
Selling Costs |
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Advertising |
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Agents commission |
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Legal expenses |
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Auction fee |
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Other selling expenses |
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| D. |
Total Profit (A-B-C) |
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| E. |
Taxable Profit (D x 0.5) |
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(Assume CGT discount of 50% if property held for more than 12 months) |
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| F. |
Tax liability (E + taxable income* marginal tax rates) |
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Current Tax rates
The following are the 2008 / 2009 tax rates for Australian residents.
| Taxable income |
Tax on this income |
| $0 - $6,000 |
Nil |
| $6,001 - $34,000 |
15c for each $1 over $6,000 |
| $34,001 - $80,000 |
$4,200 plus 30c for each $1 over $34,000 |
| $80,001 - $180,000 |
$18, 000 plus 40c for each $1 over $80,000 |
| $180,001 and over |
$58,000 plus 45c for each $1 over $180,000 |