Re: Capital gains tax on property -- Cox Business Accountants

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Date Posted: Wednesday, November 15, 08:02:30am
Author: Brendan
Subject: Re: Capital gains tax on property
In reply to: Jessica 's message, "Capital gains tax on property" on Sunday, November 12, 08:47:09pm

The idea you only need to pay Capital Gains Tax (CGT) on a rental property from when it was first rented is true, in the right context. For example: Joe buys a house and lives in it for 2 years as his personal main residence. He moves to a different house and rents out house number 1 for 3 years. He then decides to sell house 1 and is subject to CGT. He will be subject to CGT on the sale for 3 of the 5 years he owned the property. Example he made a gain of $20,000 x (3/5 yrs) = $12,000 assessable capital gain.

In your circumstances it sounds like the land and the house were treated as an investment from when you bought / built them. And if there was a genuine period of personal use (especially no deductions) then you would not be exempt from CGT. You would have to apportion the personal and investment period like the example with Joe. If subject to CGT it would be from the date the land was purchased (depending on main residence status).

Whether a property can genuinely be treated as a main residence is really a matter of fact (and common sense). If you have been claiming deductions for expenses, which means that you were making income from the property, then it must be an investment and subject to CGT when it is sold. If it was a personal property you would usually have deducted nothing, made no income from it and lived in it continuously for at least 3 months.

The best advice we can give you is to talk to an accountant. Magazines, realestate agents and financial groups may not know or explain the whole story or tax law behind what they say.

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Replies:

Re: Capital gains tax on property -- Harv, Friday, November 16, 09:33:39am