What are Capital Gains?

Capital gains is the profit earned from an investment property after it sells. It is the difference between the purchase price and selling price.

Capital gains tax is paid after the property sells.

How to Avoid Capital Gains Tax

Capital Gains Tax is a tax to be paid after an investment property sells and is a tax on the profit earned.

There are a few ways to be exempt from or receive a discount on your Capital Gains Tax on your investment property:

Primary place of residence

You may be eligible for a capital gains tax reduction or exemption if the investment property is a primary place of residence. If the investment property you own is your primary place of residence for the whole period of ownership you may be exempt from capital gains tax.

However, if there was a period of time where you have generated income from your investment property (renting a room out etc), then this may impact your eligibility.

12-Month Holding Period

If you have owned your investment property for over 12 months you may be eligible for a 50% discount on your capital gains tax. And if you chose to own your property for a longer period of time then you may be eligible for a larger tax reduction.

Capital Improvements

If there have been any improvements made for the investment property such as renovations and extensions, this value can be added to the cost base of the property. Thus, if your property cost base in higher, the proportion of profit will decrease and therefore decrease your capital gains tax.

Small Business CGT Concessions

If you are selling an investment property that is a small business, you may be eligible for certain small business capital gains tax concessions. The 4 concessions include small business 15-year exemption, small business 50% active asset reduction, small business retirement exemption and small business roll-over.