No Bull Real Estate
Call Us: 02 4955 2624
When selling a house how can capital gains tax CGT be avoided

When selling a house how can capital gains tax CGT be avoided

  • 15 Jan 2021
  • Jon Byrne

While at first thought, capital gains tax can sound daunting, with a bit of knowledge and planning, it is possible to greatly minimise or even fully eliminate how much of it you pay.

For those who are new to this, capital gains tax (CGT) is the levy you pay on the capital gain generated from the selling of that asset.

The difference between what you paid for an asset and what you sold it for is a capital gain (or loss)- less any fees incurred during the purchase.   So, if you're selling a house for more than you've paid for it, it's a capital gain. And that's called a capital loss if you sell it for less.

While it is often best to seek legal guidance about how your particular case is related to the law, this guide offers some valuable tips to set you on your way.

When do you have to pay tax on a property on capital gains?

Generally, capital gains tax (CGT) would apply if a property is sold for a benefit. Yet exceptions still remain. No CGT, for instance, applies if the property is the principal residence of an individual, i.e. their home.

If the property was bought before September 20, 1985, is another common exception . Bear in mind, however, that any major changes or renovations that have been made since that date will be considered as a separate asset under the law and thus subject to CGT.

Meanwhile, if the property is used in conjunction with a company and the taxpayer passes a number of checks, small business concessions on CGT may also apply.

How is the capital gains tax on real estate calculated?

CGT is measured on the basis of the amount of profit you gain from the selling of a house, the marginal tax rate and the tax deductions you apply for.

Gross capital gain, minus the purchase price and related costs, can be described as the selling price.

A 50 per cent discount is usually applied to the benefit when a property has been owned for more than 12 months. Companies, however, are not entitled to this discount, nor are international citizens who have acquired their property after 8 May 2012, and the self-managed super funds only enjoy a one-third discount.

Any other money you receive during the year in which you sell your property must be factored into your CGT calculations, as your marginal tax rate will influence how much CGT you actually pay. This is because CGT is not really an independent tax, but rather an aspect of your income tax considerations.

How to stop tax on your land on capital gains

When it comes to paying capital gains tax, there are a range of concessions and exemptions, and various methods designed to lower the total tax bill, too.

Here are some of the main tactics used to keep CGT from paying:

Key Exemption from Residence

Temporary guideline for absence.

Superannuation Investing.

Timing the gain or loss of money.

And partial exemptions.

1. Using the Primary Exemption from Residence

If your primary residence is the property you are selling, the income is not subject to CGT. However, if the residence has been used for generating revenue, the exemption may not be entirely available. A part of the capital gain would be taxable in this situation.

2. Using the temporary law of absence

The temporary absence law, an extension of the main residence exception, refers to a case in which you travel out of your main residence.

If you initially purchase a property as your principal residence and then rent it out, you will continue to treat the property as your main residence permanently, or for up to six years. And if you move back to the leased property within six years, the term is reset and another six years will be considered as your primary residence.

3. Superannuation investing

Although CGT only earns a one-third discount from self-managed super funds, the regular tax rate for funds is only 15 percent, which ensures that the maximum CGT rate is 10 percent. This is lower than the marginal tax rate of most citizens.

If a member of the self-managed super fund initiates a complete retirement pension from the fund's assets, the applicable rate drops to zero.

4. Get your capital gain or loss timing right

Taking into account the timing of when you make a capital gain or loss is an easy tactic to minimise CGT. If you know your income will be lower in the next financial year, you can opt to delay selling until then, so that your lower marginal tax rate results in you paying less CGT.

Timing loss may also be beneficial. An example of an investor planning to make a capital gain from a sale, but also owns securities that are trading lower than the capital gain at an unrealised loss. The individual can consider selling the shares before the sale, so they can subtract the loss from their capital gain.

5. Dream of partial exemptions

Holding a property for more than 12 months will give CGT a 50 percent discount, and if you move into a rental property, you will also obtain a partial exemption.

If you still use your primary residence as a place of business, you are also entitled to a reduction in CGT.

Investing in affordable housing, meanwhile, will attract a 60% decrease in CGT as long as the housing meets certain conditions and the rent is paid at a reduced rate.

It is possible to apply capital losses against your capital gains as well, but not against your ordinary income.

However, as ever, insure that you seek expert advice to get the best result for your particular case.

Note this article is not financial or legal advise. Please check with your financial and legal specialist counsel before making any decisions of your own.

For further information about real estate in this area, contact No Bull Real Estate, your most reliable and friendly real estate agents in Newcastle and Lake Macquarie. Buying, selling, leasing for residential, commercial, industrial property, contact your local expert to buy, sell or lease today on 49552624 or https://www.nobullrealestate.com.au

 

 

 

 

February

02 Feb 2021 | Merewether Real Estate

January

25 Jan 2021 | Must haves for renovation of any bathroom

22 Jan 2021 | How to purchase a house thats not for sale

20 Jan 2021 | How to Locate a Rental Property

16 Jan 2021 | Mayfield Real Estate

15 Jan 2021 | When selling a house how can capital gains tax CGT be avoided

13 Jan 2021 | New versus existing homes for first home buyers

10 Jan 2021 | Why is landlord insurance an investment that you would not regret

07 Jan 2021 | Maryland Real Estate

02 Jan 2021 | What is the yield on rent

December

26 Dec 2020 | What is CGT Capital Gains Tax

23 Dec 2020 | Where to start buying an investment property

21 Dec 2020 | Landlords Your rights and responsibilities at a final inspection

18 Dec 2020 | Lambton Real Estate

14 Dec 2020 | Pros and Cons of Investment in Properties

12 Dec 2020 | How to relieve tension this holiday season

09 Dec 2020 | Kotara Real Estate

07 Dec 2020 | Holiday reading to have you inspired for the New Year

01 Dec 2020 | Purchasing property in a super fund that is self managed SMSF

November

27 Nov 2020 | Jesmond Real Estate

24 Nov 2020 | How to buy a home by making a winning bid

20 Nov 2020 | Will missing your coffee in the morning actually make you rich

18 Nov 2020 | How much is too much rent

15 Nov 2020 | Islington Real Estate

11 Nov 2020 | What to look for in a property for investment

09 Nov 2020 | Tips for freshening up your investment property and saving money

06 Nov 2020 | The one concept that brings everything into perspective

04 Nov 2020 | Hamilton Real Estate

01 Nov 2020 | 5 styles for your home office spruce up

October

28 Oct 2020 | Using your investment property to make more profits

26 Oct 2020 | Key concerns when refinancing

22 Oct 2020 | Georgetown Real Estate

20 Oct 2020 | Decluttering in Spring

15 Oct 2020 | Fletcher Real Estate

12 Oct 2020 | You can do DIY home projects if you rent

05 Oct 2020 | Cooks Hill Real Estate

01 Oct 2020 | 2020 The Year of Sea Change and the tree change

September

29 Sep 2020 | Caves Beach Real Estate

23 Sep 2020 | Should you offload your investment property

20 Sep 2020 | Bolton Point Real Estate

19 Sep 2020 | Principles for long term financial stability

13 Sep 2020 | 5 tricks for bigger living areas

11 Sep 2020 | Belmont Real Estate

06 Sep 2020 | Trends emerging in bedrooms

03 Sep 2020 | Elermore Vale Real Estate

01 Sep 2020 | Simple tips for spring cleaning

August

30 Aug 2020 | Housing in the second half of 2020?

27 Aug 2020 | Four ways to customise your house

24 Aug 2020 | Killingworth Real Estate

15 Aug 2020 | Four property investment tips

11 Aug 2020 | Newcastle Real Estate

04 Aug 2020 | Budgeting in the new financial year

July

29 Jul 2020 | Cardiff Real Estate

27 Jul 2020 | Rethink Mortgage Insurance

20 Jul 2020 | Boolaroo Real Estate

17 Jul 2020 | Renters to increase in Australia

13 Jul 2020 | Going stir crazy in your home?

06 Jul 2020 | Blackalls Park Real Estate

June

29 Jun 2020 | 6 Bookshelf Ideas

22 Jun 2020 | Edgeworth Real Estate

15 Jun 2020 | Whats the property market up to now?

12 Jun 2020 | Cameron Park Real Estate

10 Jun 2020 | 4 Common property ownership structures

04 Jun 2020 | End of financial year is coming

02 Jun 2020 | Holmesville Real Estate

May

29 May 2020 | Hygge: perfect time to embrace cosy

25 May 2020 | West Wallsend Real Estate

19 May 2020 | Catch up on all your rental property admin

13 May 2020 | Argenton Real Estate

11 May 2020 | Four amazing books to explore right now

05 May 2020 | Bullet-proofing your investment property

01 May 2020 | Barnsley Real Estate

April

25 Apr 2020 | Mindsets keeping you from prosperity

22 Apr 2020 | Awaba Real Estate

20 Apr 2020 | Demand for apartments in 2020?

14 Apr 2020 | Cleaning to escape the flu

09 Apr 2020 | Arcadia Vale Real Estate

07 Apr 2020 | 4 Ways to maximise your rent in a crisis

March

30 Mar 2020 | Wickham Property Management

25 Mar 2020 | Does the value of my investment go down?

17 Mar 2020 | Waratah West Property Management

12 Mar 2020 | How to build savings and pay off debt

09 Mar 2020 | Being smart about your tax deductions

05 Mar 2020 | Waratah Property Management

02 Mar 2020 | 5 alternatives to a side table

February

27 Feb 2020 | Decade ahead for Australia's cities

24 Feb 2020 | Warabrook Property Management

18 Feb 2020 | The benefits of rentvesting

14 Feb 2020 | Wallsend Property Management

12 Feb 2020 | Try these homemade floor cleaner recipes

07 Feb 2020 | 4 items to transform your tiny kitchen

05 Feb 2020 | Tighes Hill Property Management

03 Feb 2020 | Why you shouldn't buy a rental locally

January

30 Jan 2020 | Stockton Property Management

28 Jan 2020 | 6 Tips for Investing Success in 2020

20 Jan 2020 | Shortland Property Management

17 Jan 2020 | New Year decluttering ideas

13 Jan 2020 | Become a better investor with these 4 tips

07 Jan 2020 | Financial advice for investment in property

December

17 Dec 2019 | Make your home a peaceful sanctuary

13 Dec 2019 | Effectively setting goals for the new year

09 Dec 2019 | Rankin Park Property Management

06 Dec 2019 | Things to do around home these holidays

01 Dec 2019 | Mount Hutton Property Management

November

29 Nov 2019 | Buying Property with a Friend

25 Nov 2019 | Tips Every Renter Needs to Know

22 Nov 2019 | Morisset Property Management

20 Nov 2019 | Consumer Confidence is at a Four-Year Low

16 Nov 2019 | Co-Living is Providing New Living Spaces

09 Nov 2019 | Minmi Property Management

05 Nov 2019 | 0% Interest Rates and Start QE

01 Nov 2019 | Merewether Heights Property Management

October

30 Oct 2019 | Splitting Rent & Expenses with Housemates

23 Oct 2019 | Merewether Property Management

17 Oct 2019 | Mayfield West Property Management

15 Oct 2019 | Rental Market Best Affordability in 11 Years

11 Oct 2019 | Strengthen your Investment Strategy

08 Oct 2019 | 5 Steps to Get Your Rental Bond Back in Full

04 Oct 2019 | Mayfield East Property Management

02 Oct 2019 | 3 Key Steps for Property Investing Success

September

26 Sep 2019 | Mayfield Property Management

23 Sep 2019 | Is Australia headed for a 0% cash rate?

18 Sep 2019 | Maryville Property Management

16 Sep 2019 | House or apartment? Which is better?

11 Sep 2019 | Maryland Property Management

09 Sep 2019 | Top Tips for Spring Cleaning your Home

05 Sep 2019 | Lambton Property Management

03 Sep 2019 | Fragile Conditions in Construction Sector

August

30 Aug 2019 | Winter reading for the savvy investor

26 Aug 2019 | Kotara South Property Management

24 Aug 2019 | Freshen up your space in winter

20 Aug 2019 | Power of buying in good school catchments

18 Aug 2019 | Kotara Property Management

14 Aug 2019 | How to dress up a drab bathroom

12 Aug 2019 | The Junction Property Management

09 Aug 2019 | Another month, another rate cut

07 Aug 2019 | Jesmond Property Management

July

30 Jul 2019 | Islington Property Management

25 Jul 2019 | The Federal Election is over, now what?

19 Jul 2019 | The Hill Property Management

18 Jul 2019 | Multipurpose items for your home

15 Jul 2019 | Hexham Property Management

12 Jul 2019 | How to make tax time go smoothly

08 Jul 2019 | Hamilton South Property Management

06 Jul 2019 | 4 things when searching for a rental

04 Jul 2019 | ATO cracking down on deductions

02 Jul 2019 | Hamilton North Property Management

June

30 Jun 2019 | The case for renting over buying

24 Jun 2019 | Hamilton East Property Management

20 Jun 2019 | New home approvals declined in 2019

17 Jun 2019 | Hamilton Property Management

15 Jun 2019 | Turn your place into a cosy winter home

11 Jun 2019 | Georgetown Property Management

08 Jun 2019 | Regional Areas Value Declines

06 Jun 2019 | Time Spent On Property Research

03 Jun 2019 | Fletcher Property Management

May

29 May 2019 | Conversations with potential housemates

27 May 2019 | Elermore Vale Property Management

25 May 2019 | Lending to households has increased

22 May 2019 | Cooks Hill Property Management

20 May 2019 | Create more storage space in your home

13 May 2019 | 3 finance hacks investors should know

10 May 2019 | Carrington Property Management

06 May 2019 | Broadmeadow Property Management

03 May 2019 | Is it worth buying a budget property

01 May 2019 | Black Hill Property Management

April

29 Apr 2019 | Rental Vacancy Rates

23 Apr 2019 | Birmingham Gardens Property Management

17 Apr 2019 | Beresfield Property Management

16 Apr 2019 | Off Market Property Sales

11 Apr 2019 | Strong Rental Applications

08 Apr 2019 | Bar Beach Property Management

05 Apr 2019 | Increase your chances of a loan approval

03 Apr 2019 | Adamstown Heights Property Management

01 Apr 2019 | Moving into a share house

March

28 Mar 2019 | Adamstown Property Management

25 Mar 2019 | Banking Royal Commission

18 Mar 2019 | Newcastle Property Management

15 Mar 2019 | Proposed negative gearing policy

12 Mar 2019 | Seahampton Property Management

08 Mar 2019 | Gross rental yields are at a 2½ year high

04 Mar 2019 | Edgeworth Property Management

February

25 Feb 2019 | The importance of negotiation skills

20 Feb 2019 | Barnsley Property Management

14 Feb 2019 | Property market in 2019

07 Feb 2019 | Warners Bay Real Estate

January

31 Jan 2019 | Split your household bills

23 Jan 2019 | West Wallsend Real Estate

18 Jan 2019 | Fixtures and fittings in your property

17 Jan 2019 | Toronto Real Estate

11 Jan 2019 | Australian house prices in 2019

08 Jan 2019 | Speers Point Real Estate

December

18 Dec 2018 | Rathmines Real Estate

11 Dec 2018 | Killingworth Real Estate

06 Dec 2018 | Holiday reading for property investors

03 Dec 2018 | Popular areas to rent in 2018

November

30 Nov 2018 | Jesmond Real Estate

21 Nov 2018 | Getting to know your neighbourhood.

13 Nov 2018 | Islington Real Estate

09 Nov 2018 | Indicators for future growth

07 Nov 2018 | Hamilton Real Estate

02 Nov 2018 | New home construction to fall in 2019.

October

29 Oct 2018 | Fennell Bay Real Estate

25 Oct 2018 | Are you storm ready?

22 Oct 2018 | Fassifern Real Estate

15 Oct 2018 | How to keep your property cool

11 Oct 2018 | Elermore Vale Real Estate

08 Oct 2018 | Is it the right time to buy again? 

05 Oct 2018 | Cooks Hill Real Estate

02 Oct 2018 | Avoid financial pitfalls

September

26 Sep 2018 | Coal Point Real Estate

19 Sep 2018 | Get your rental bond back

10 Sep 2018 | Carrington Real Estate

06 Sep 2018 | The rise of micro-apartments

03 Sep 2018 | Cardiff Real Estate

August

31 Aug 2018 | Downsides to positive cash flow properties?

28 Aug 2018 | Callaghan Real Estate

20 Aug 2018 | Booragul Real Estate

13 Aug 2018 | How To Find A Great Housemate

03 Aug 2018 | Boolaroo Real Estate

July

27 Jul 2018 | Blackalls Park Real Estate

20 Jul 2018 | Birmingham Gardens Real Estate

12 Jul 2018 | Beresfield Real Estate

05 Jul 2018 | Awaba Real Estate

03 Jul 2018 | Broadmeadow Real Estate