Property Investment 101: The basics of capital gains tax

By the resi financial blog team, 25 November 2013

The basics of capital gains tax

There are a number of different costs and fees that need to be considered when you become a property investor. But one of the biggest, most important ones to be aware of comes when you decide to sell your assets. This is called capital gains tax (CGT).

What is Capital Gains Tax?

In Australia, any profits that are made from the sale of an asset - most notably property - are liable to be taxed as income at the end of that financial year.

What this means is that any profits you make from the sale of your house from the original purchase price is subject to taxation, as long as it wasn't your main residence. 

The basic calculation for CGT is based on the sale price of your property minus any expenses, or your cost base. The cost base is the original purchase price plus any ownership, title or incidental costs, but minus any government grants or depreciable items.


There are a number of different provisions and discounts to be aware of that could help to reduce the overall amount of CGT you have to pay at the end of the time you own your home.

The most notable is the 50 per cent reduction on CGT if you hold the property for more than a year if you're an individual taxpayer, or 33.3 per cent if purchased through a superannuation fund.

You can also avoid paying for CGT if the property was considered your main place of dwelling.

This makes renovation a viable option. For example, living in a property to slowly renovate it over the years and selling it once you've finished.

However, discussing your investment options with a financial expert will help to put things in the right perspective for your personal goals. There are many factors involved with property investment, so taking the time to research and figure out where you stand is the best option.

Categories: Home Loans, Property Investment