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

Tag: CGT

  • 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.

  • Earning Money From The Sharing Economy

    Earning Money From The Sharing Economy

    The sharing economy has become a big part of daily life. It’s become easy to hop on an app for a ride-share, find a place to stay or hire someone with skills you don’t have to help you. Whether for some extra cash, or as your main job, you might be thinking about offering your services as well.

    Here are three tips on success in the sharing economy

    1. Paying tax on your earnings

    You may need to pay tax on any income you earn from the sharing economy. The Australian Taxation Office recommends you keep records of all the income you earn and any expenses you have. In some cases, you might be able to claim deductions and you can find more information on this at ATO.gov.au.

    Remember that your earnings from the sharing economy count as part of your overall annual income if you have another job, or work multiple share economy gigs, so will influence your marginal tax rate.

    There are a few ways you can manage tax payments. Some may choose to make periodic payments (on a time period you choose, such as monthly or quarterly), while others may decide to make a lump sum payment at the end of the financial year. Making a regular payment using a system like PAYG can be a helpful way of keeping track of and staying on top of payments. Otherwise, consider allocating a certain amount into a separate account to ensure you have the money ready to pay your tax when its due.

    Those renting residential property (or rooms in a property), may also need to consider Capital Gains Tax (CGT). Even if the property is otherwise your main residence, the portion of time you rent it out for gain can result in CGT being applied if you sell the property (see more information).

    2. Insurance

    If you already have insurance on your property or car, renting out a room or ride-sharing can affect your insurance policy. Check in with your provider to ensure you have the right protection for you and adjust your policy if you need to.

    For those who don’t already have insurance, it may be helpful to investigate different options with insurance providers to make sure you are protected in case of damage to your property, or any accidents that could occur while you are doing your job. Some third party providers like Uber and AirBnB also offer some limited insurance coverage when you partner with them, however, you should review their policy and any restrictions before relying on these as your primary cover.

    3. Registering as a business and paying GST

    When you decide to work in the sharing economy, you may need to consider registering as a business or sole trader to receive an Australian Business Number. You can register at ato.gov.au.

    In addition, you might need to register for GST if your income from the sharing economy is $75,000 or more, or if you are working as a driver for a ride-share company. GST also applies to those renting out commercial residential spaces, such as hotel rooms, serviced apartments, Bed & Breakfasts or commercial spaces like function rooms and office spaces. You can find more information at ato.gov.au.

    These are just a starting point. You might also think about a range of other activities like protective equipment and warranties, invoices, logbooks or even logistics for living off the sharing economy. You might also seek advice from an professional to help you understand and manage the finer details of items like setting up an ABN, paying your own tax or registering for GST.

    At the end of the day, one of the most important things to remember when you work in the sharing economy is to keep yourself safe – you are your biggest asset.

     

    Source: BT

  • CGT relief provisions for SMSFs

    Self-managed super funds can access capital gains tax (CGT) relief to provide temporary relief from certain capital gains arising as a result of trustees complying with the super reforms commencing on 1 July 2017.

    The CGT relief provisions have been made available to preserve the income tax exemption for certain, accrued capital gains which would have been exempt if the underlying CGT assets had been disposed of before a member transfers to comply with the transfer balance cap and before the changed treatment of TRIS’s.

    Transitional CGT relief is available for certain CGT assets held by a complying SMSF at all times between the start of 9 November 2016, to ‘just before’ 1 July 2017. However, the CGT assets eligible for the relief depend on whether the fund uses the segregated or proportionate method for the 2016-17 income year.

    Trustees need to be aware that CGT relief is not automatic – it must be elected by a trustee on an asset-by-asset basis. SMSF trustees will need to review their fund’s circumstances and determine if CGT relief is available and appropriate. If trustees do decide to obtain CGT relief, trustees must advise the ATO in the approved form on, or before, the day they are required to lodge their fund’s 2016-17 income tax return.

    As the decision is irrevocable, careful planning is required. Trustees should contact our office if they are unsure if CGT relief is suitable for their circumstances.

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

    Need SMSF investment planning – Speak with our team

     

  • 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