Capital Gains Tax (CGT)...Be One Step Ahead
By DFJ Real Estate

If you are considering selling your investment property, remember to factor in any capital gains tax you may owe. Although it's commonly referred to as a separate tax, it's not. Instead, your profit from selling the property is added to your annual income, and the standard tax rate is applied.

To understand how capital gains tax works, consider the following example. Let's say you purchased the property for $500,000, incurred $20,000 in purchase costs and $2,000 in legal fees, and invested $8,000 in property improvements. After factoring in $25,000 for capital works and depreciation, your total cost base is $505,000. If you sell the property for $750,000, your capital gains would be $245,000. When preparing your tax return, the capital gains will be added to your annual income, and you will be required to pay the corresponding taxes.