CGT catches a lot of investors off guard. [cite: 364] The calculation itself isn’t complicated once you understand the structure. [cite: 365]
The Basic Calculation
Capital gains tax (CGT) is calculated by subtracting your cost base from your sale price. [cite: 367] The resulting gain is added to your assessable income for that year and taxed at your marginal rate. [cite: 368] For example: if you buy for $500,000 and sell for $720,000, your capital gain is $220,000 before adjustments. [cite: 369, 370]
Your Cost Base Includes:
- Purchase price plus stamp duty [cite: 373]
- Legal and conveyancing fees [cite: 374]
- Building and pest inspection costs [cite: 375]
- Capital improvements made to the property [cite: 376]
- Costs of sale — agent commission, marketing, legal fees [cite: 377]
The 50% Discount
If you’ve held the property for more than 12 months, you’re entitled to a 50% CGT discount as an individual. [cite: 379] This reduces your taxable gain to $110,000 in the example above. [cite: 381]
Important Note: CGT is complex. Always speak with a qualified accountant before making decisions. [cite: 384, 385]
References: 1. Real Estate Calc. [cite: 391] 2. Picki. [cite: 392] 3. Australian Taxation Office. [cite: 393]