Capital gains tax is one of the biggest killers of investment returns and can be the killer of your property dreams.
In this video, I'll explain six legal strategies to avoid capital gains tax on investment properties in Australia.
Strategy 1: Consider the timing
It is wise to consider which financial year you choose to sell your investment property in. If you know your taxable income is going to be larger next financial year, it would be best to sell your property in this financial year to make the most of your lower marginal tax rate.
Strategy 2: 50% discount
A capital asset that has been owned for 12 months or more is eligible for a 50% discount of the gross capital gain. So by holding onto your assets for at least 12 months, you can save a significant amount in taxes.
Strategy 3: Primary residence exemption
Your primary residence/family home is exempt from capital gains. Australians may only have one primary residence at a time so carefully consider your options if you have more than one property.
Strategy 4: Six year rule
The temporary absence rule - commonly known as the six year rule - allows Australians to elect a property to be their primary residence for up to six years without actually living in that property.
Strategy 5: Increase cost base
Ensure you include all costs associated with the property when calculating the cost base of your property. The cost base can include: acquisition price, incidental costs (stamp duty, advertising, valuation costs, professional advice), costs of ownership (non-deductible interest, repairs & maintenance, rates, land tax - note that these had to have been non-deductible), and capital costs to increase value (construction, renovations and extensions).
Strategy 6: Utilise capital losses
Offset the capital gain from the sale of your investment property with previous year capital losses, or decide to "tax loss harvest" by selling any other losing capital positions (unrealised losses on shares) to offset the gain in the current year.
Book A Professional Tax Consultation: www.sustainableprofits.com.au
6 авг 2024
