Capital Gains Tax Basics
Capital gains tax will effect a taxpayer's income tax liability by including in their assessable income any net capital gain derived in that income year.
A capital gain (or loss) arises upon the happening of a CGT event. The Income Tax Assessment Act 1997 sets out a number of 'CGT events', with the most common being the disposal of a CGT asset. As far as property is concerned, a CGT event will occur when a taxpayer sells (or otherwise disposes of) their property.
If, upon the sale of their property, a taxpayer receives capital proceeds in excess of the cost base for that property, the excess will be a capital gain and, unless otherwise exempted, that gain will be included in the taxpayers assessable income for that income year.
The exceptions to this general principle which taxpayers acquiring real property may take advantage of include:
- an exemption for gains derived by an individual taxpayer from the sale of a dwelling which was used as the taxpayer's main residence throughout the period of ownership; and
- a discount of the capital gain where the taxpayer is an individual, superannuation fund or trust, and the property was owned by the taxpayer for at least 12 months (this exception only applies to property sold after 21 September 1999).
Because of the income tax consequences of acquiring investment property, Equitygear recommends that anyone considering investing in property consult their professional advisers.
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