Capital Gains Tax (CGT)

Definition

Capital Gains Tax (CGT) is the tax levied on the profit made when selling an asset, including investment property. In Australia, the capital gain is added to the investor's assessable income in the year of sale. If the property has been held for more than 12 months, individuals are entitled to a 50% CGT discount, meaning only half the gain is taxed.

Why It Matters for Property Investors

Understanding CGT is essential for planning your exit strategy. The 50% discount for assets held longer than 12 months significantly reduces the tax burden and encourages longer holding periods. Investors can also use negative gearing losses accumulated over prior years to offset capital gains. Timing the sale and understanding the impact on your tax bracket can save thousands of dollars.