Leenane Templeton – Newcastle Business Accountants, Business Advisors & Financial Planners

Tag: capital gains tax

  • Selling Your Rental Property: What You Need to Know About Capital Gains Tax

    Selling Your Rental Property: What You Need to Know About Capital Gains Tax

    If you’re thinking about selling your rental property, one of the most important things to prepare for is Capital Gains Tax (CGT).

    Many property investors underestimate how significant CGT can be—but with the proper planning and advice, you can manage your tax position effectively and avoid surprises at tax time.

    When CGT Applies
    A CGT event occurs as soon as you sign the contract of sale, not at settlement. This means the timing of your sale determines the financial year in which your gain or loss is reported. If you’re considering selling close to the end of the financial year, the contract date could impact your taxable income.

    Calculating Your Gain or Loss
    Your capital gain (or loss) is the difference between your sale proceeds and the cost base of your property. The cost base isn’t just the purchase price—it also includes things like legal fees, stamp duty, agent’s commissions, and capital improvements. On the other hand, you’ll need to reduce this figure by any depreciation or capital works deductions you’ve already claimed over the years.

    For example, if you bought a property for $750,000, spent $30,000 on acquisition costs and $6,000 on improvements, but claimed $40,000 in deductions, your adjusted cost base would be $746,000. If you then sold the property for $900,000, your capital gain would be $154,000.

    The CGT Discount
    If you’ve owned the property for more than 12 months, you may be entitled to the 50% CGT discount as an individual. This can halve the amount of your gain that’s included in your taxable income—making timing an important part of your tax planning.

    What If You Lived There Before?
    If the property was once your main residence, you may qualify for a full or partial exemption. For example, if you lived in the property before renting it out, or if you only rented out part of it, you could reduce the taxable portion of your gain. This is where accurate records and dates become critical.

    Other Key Considerations
    • Co-ownership: If the property is jointly owned, each owner reports their share of the gain or loss.
    • Pre-CGT properties: If you bought before 20 September 1985, the property may be exempt—but improvements made after this date could still trigger CGT.
    • Losses: If you sell at a loss, you can’t claim it against regular income, but you can carry it forward to offset future capital gains.

    Why Advice Matters
    The way you calculate your gain, apply exemptions, and time your sale can make a big difference to your final tax bill. Small errors—like forgetting to adjust for depreciation claims—can be costly if the ATO reviews your return.

    Don’t wait until after the sale to work this out. If you’re planning to sell, let’s review your figures in advance. Together, we can model the potential tax outcome, explore whether exemptions or discounts apply, and make sure you’re in the best possible position before signing the contract.

    Get in touch before listing your property, so you can sell with confidence, knowing exactly where you stand on Capital Gains Tax.

    Disclaimer
    The information contained in this publication is for general information purposes only, professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

  • CGT rollover when transferring assets in a divorce

    CGT rollover when transferring assets in a divorce

    Transferring the ownership of assets from one party to another will typically attract CGT. However, in the event that a change in ownership occurs due to the breakdown of a relationship, you may be eligible for a rollover of the asset.

    A rollover allows taxpayers to defer or disregard a capital gain or loss that would normally arise on a CGT event. Specifically, a same asset rollover can occur when an individual transfers assets to their exspouse, as the transferee already has an involvement with the asset. The spouse who receives the asset will make the capital gain or loss when they dispose of the asset in future. They will also receive the cost base of the asset (the cost of the asset at the time of its initial purchase), as well as expenses incurred when acquiring, holding and disposing of the asset.

    The rollover applies to CGT events that occur as a result of:
    • An order of a court or a court order made by consent under the Family Law Act 1975 (foreign laws with similar logistics may also apply).
    • A court order under a state, territory, or foreign law relating to the breakdown of a relationship.
    • A binding financial agreement, or a corresponding written agreement.

    Separating couples transferring assets in accordance with a binding financial agreement will not require court intervention, however, for rollover to apply, the following must be true at the time of transfer:
    • the involved spouses are separated,
    • there is no reasonable expectation of cohabitation resuming,
    • the transfer of assets occurred for reasons directly related to the breakdown of the relationship. For example, the transfer may not be directly connected to the separation if the spouses already agreed to the transfer before the breakdown of their relationship.

    Couples with informal or private agreements related to the transfer of assets will not be eligible for a rollover, and CGT will apply to these ownership transfers. The parties cannot choose whether or not the rollover applies to their situation.

    For financial help through your divorce or seperation please contact our LT financial advisors. Call (02) 4926 2300.

  • ATO focus on collectables

    The ATO is working with insurance companies to assess artworks and collectables owned by taxpayers and identify the owners of these kinds of assets.

    There has been an increasing concern by the ATO that assets such as collectables are not being properly accounted for. Since these assets may be subject to capital gains tax (CGT) on disposal, taxpayers should be properly accounting for their assets and aware of any capital gains tax applicable.

    Collectables are items that individuals use or keep mainly for the personal use or enjoyment by them or their associates and include items such as paintings, sculptures, drawings, engravings or photographs, reproductions of these items or property of a similar description or use, jewellery, antiques and coins.

    A collectable also includes an interest in any of the items listed above, a debt that arises from any of those items or an option or right to acquire any of those items.

    Capital gains or losses made from a collectable can be ignored provided the collectable was acquired for $500 or less; the interest in the collectable acquired was for $500 or less before 16 December 1995, or the interest in the collectable it had a market value of $500 or less when acquired.

    Capital losses from collectables can be used only to reduce capital gains (including future capital gains) from collectables. There is no time limit on how long a net capital loss from the disposal of a collectable can be carried forward.

    The ATO’s attention is not limited to capital gains tax and new rules have been introduced in relation to the recording and storage of collectables held by self managed super funds.

    From 1 July 2016 new rules regarding any collectable and/or artwork owned by an SMSF state:

    • collectables cannot be stored at an SMSF trustee’s residence
    • an SMSF trustee or a related party is not permitted to lease or use any of the collectables
    • the collectable must be insured by its own separate policy
    • the storage decisions by the trustees must be documented and minuted
    • if the collectable is to be sold to an SMSF trustee or related party, then a valuation by a qualified independent valuer may be required to determine the market value.

    For more information contact us at Leenane Templeton on 02 4926 2300 or email success@leenanetempleton.com.au