02 Aug How to calculate capital gains tax
We get asked regularly how to calculate capital gains tax on the sale of a real estate property so we decided to give you an example so you can see how it works.Please note this calculation is applicable for individuals only (not a SMSF or company)
Very simple example:
Buy a property 1st March, 2007
| COST | 300 000 |
| + Stamp Duty | 10 000 |
| + Legals | 1 000 |
| Total Cost | $311,000 |
Sell a property 10th April, 2015
| SALE | 450 000 |
| Less Commission | 11 700 |
| Less Legals | 1 000 |
| Total Sale Price | $437 300 |
Capital Gain in simplest terms is:
| Sale Price | 437 300 |
| Less Cost Price | 311 000 |
| 126 300 |
Because owned property for greater than 1 year:
| 50% discount | 63 150 |
Say owned by 2 people
| 31 575 | 31 575 |
| P1 | P2 |
$31 575 will be added to the individuals other income and taxed accordingly.
Therefore the higher the person’s ordinary yearly income the higher the capital gain will be taxed.
Please note the following:
- No capital gain if it is principal place of residence for whole time people owned property can be pro rata-ed if part rented part principal place of residence.
- No 50% Discount if property held for less than 1 year. Time is contract date to contract date.
- Other capital costs incurred during ownership period could increase cost based and therefore reduce capital gain. e.g. Adding carport or pergola or renovations
- If in only one person’s name 100% of capital gain to that person.
Please remember this is general advice only & you should seek professional advice for your own particular circumstances.