Investing in property is still one of the most valuable ways to build wealth in Australia.
In particular, Melbourne properties have increased in median price every quarter for the past five and half years – underlining their desirability as an asset.
Yet like any form of investment, property is subject to tax payments including stamp duty when you purchase and capital gains tax (CGT) when you sell.
The ATO views a capital gain (or capital loss) as the difference between what an asset cost you and what you receive for it when you dispose of it. For example, if you paid $500,000 for an investment property in 2010 and then sell it in 2018 for $1,000,000, you’ve made a capital gain of $500,000, which is added to your assessable income for that financial year.
Some good news... if you’ve owned the property for more than 12 months, you are eligible for a 50% capital gains tax discount. Similarly, if the property has been your primary place of residence for any period during your ownership, this will also reduce your CGT bill.
For more information about CGT tax, head to the ATO website or consult your tax expert.
