Selling? How much Capital Gains Tax do I need to pay?

capital-gains-taxA capital gain or capital loss is the difference between what it cost you to get an asset and what you received when you disposed of it.

You pay tax on your capital gains. It forms part of your income tax and is not considered a separate tax, although it is generally referred to as capital gains tax (CGT).

If you make a capital loss, you cannot claim it against income but you can use it to reduce a capital gain in the same income year. If your capital losses exceed your capital gains or you make a capital loss in an income year you don't have a capital gain, you can generally carry the loss forward and deduct it against capital gains in future years.

All assets you’ve acquired since tax on capital gains came into effect (on 20 September 1985) are subject to CGT unless specifically excluded.

Selling assets such as real estate or shares is the most common way you make a capital gain or capital loss. CGT also applies to intangible assets such as business goodwill.

Some of your main personal assets are exempt from CGT, including your home, car, and most personal use assets, such as furniture. CGT also doesn’t apply to depreciating assets used solely for taxable purposes, such as business equipment or fittings in a rental property.

If you’re an Australian resident, CGT applies to your assets anywhere in the world.

What is the best structure for the purchase my investment property?

loan-structureFirstly you need to identify who or what is going to own the portfolio. The importance of this decision cannot be underestimated and the wrong decision could cause you plenty of grief down the track.

The major things to consider include:

  • How to best control your assets
  • Protecting your assets against any litigation claims
  • Keeping flexibility in order to be able to distribute profits and maximise tax benefits
  • Understanding the expenses you will need to meet to maintain the structure.

This process may take you some time in order to determine the best structure for you. There are several different structures that you can hold your properties in including your own name, companies, unit trusts, family trusts and discretionary trusts, for example.

It’s important to make sure that you get this right from the beginning because it can be very costly to try and change ownership once your portfolio is established.

Am I eligible for Land Tax?

Each State is different the following relates to NSW

land-taxWho is considered to be a land owner for land tax purposes?

An owner includes a sole owner, joint owners, a company, a trustee of a trust, a beneficiary of a trust, a shareholder in a home unit company and /or any person deemed to be an owner by the land tax legislation including a person who leases land from the Crown or from a Local Council.


What if I own property in NSW with someone else?

In most cases the OSR will issue land tax assessments to each owner in their respective proportions. The ownership proportion is shown on the land tax assessment.


How is land tax calculated?

Ownership is based on ownership as at midnight on 31 December in any year.


What is the amount of land tax payable?

Land tax rates and land tax thresholds are determined each year by the OSR.

How does the threshold work if I own several land items?

If you own or have interests in more than one property then the value of all your liable land will be added together. You will then be charged land tax on the combined land value above the land tax threshold. Each taxpayer is only entitled to the benefit of one threshold.


When is NSW land exempt from land tax?

There are certain statutory exemptions. For instance if your property is your principle place of residence and is not owned by a company or trust, it will be exempt from land tax.

Other statutory exemptions include:

  • and used and occupied primarily for boarding houses;
  • land used for low-cost accommodation within a five kilometre radius of the City of Sydney;
  • retirement villages, aged-care establishments and nursing homes;
  • religious and charitable institutions; and
  • some other non profit organisations. 

What other allowances are available?

Allowances relating to heritage and other affectations could apply. These are usually noted on your land tax assessment. If not, a separate application should be made to the OSR. Please contact us and we can elaborate.

What if my property does not earn income in any land tax year?

The property will be subject to land tax even if it is not income producing (eg a holiday home, a hobby farm or vacant land).

What if I sell my property during the year?

The land tax assessment is based on land ownership as at midnight on 31 December each year. If you own property at that time then you are liable for the duty as assessed.

If you sell your property during the year then you need to notify the OSR accordingly.

As between the buyer and the seller, it is possible to agree with the buyer that land tax be apportioned as at the date of settlement of the sale of the property, but this is something that should be expressly negotiated with the buyer at the time of sale.

You are not entitled to a refund if you sell your property during the year.

When do I need to pay my land tax?

You need to pay your land tax by the first instalment date shown on your land tax notice of assessment. If you pay your land tax in full by this date, you will be eligible for a 1.5% discount on your land tax. Interest and other penalties apply for late payment. 

Should I positively or negatively gear my investment property?

Negative Gearing :

  • Negative Gearing is when you put in more than the rent you are earning to cover your expenses
  • These expenses then becomes a tax deduction, meaning you will pay less income tax
    • But you are still putting in $xx into your Investment

Positive Gearing :

  • When your rent is high enough to cover all your outgoings plus you receive an ongoing income from the difference
  • Yes your tax deductions are now far less but the upside is you are not putting in any money into your investment
    • Western Sydney Office:

      Tomaree House, Suite 1,
      32-34 Ross Street
      North Parramatta NSW 2151

      Tel: 02 8833 4788
      Fax: 02 8833 4711