Capitals Gains Tax (CGT) is a tax administered by the Australia Taxation Office (ATO) and is payable where a capital gain has been made on an investment property that has been acquired after September 19, 1985.
By improving your investment property through renovations, additions or perhaps knocking down and rebuilding the entire house, you are increasing its total value, and in turn increasing your capital gains on sale. Conversely if the value of your asset has decreased from the time you purchased to the time you sold the investment it is considered a capital loss. Investors need to determine the increase or decrease in value over the holding period to calculate the Capital Gains Tax implications.
When you hear the term ‘realise’ a capital gain or loss, this simply refers to the fact that a CGT event has occurred and you will need to deal with this event in your tax return. The most common CGT event is when you sell an asset or investment. Gifting a property also triggers a CGT event.
Providing an accurate assessment
A Capital Gains Tax Valuation Report is used to help identify the capital increase or decrease of your property asset.
You may choose to have a valuation conducted when a capital gains tax event occurs or you may choose to have a retrospective CGT valuation conducted when you decide to sell the property.
The ATO has warned taxpayers who undertake their own valuations – or use valuations from people without adequate qualifications – risk incorrectly reporting their tax and may be liable to administrative penalties.
McLennan Steege Smith & Associates (McSSA) has extensive experience across all valuation areas and can provide the appropriate capital gains tax valuation for you, whatever the situation either current or retrospective.
Choose your timing
Your capital gains tax can be minimised by choosing your renovations and improvement times carefully.
If you are considering selling an asset on which you have made a gain, you may also like to consider the timing of the sale.
Waiting until 1 July means the potential CGT bill is deferred until the following financial year. This can assist with cash flow by providing an extra 12 months to deal with the tax bill.
Your accountant, solicitor or financial advisor can help you chose the right timing for renovating or selling.
Expertise in all valuation matters
Contact us today to find out more about how we can assist you with your requirements or to request an obligation-free quote.