Know The Tax Implications

What you'll learn in this step is to ensure you are up to date with changes to taxation law that may affect your investment property. Capital gains tax.

Capital Gains Tax (CGT) is the tax charged on any capital gains that arise from the sale or disposal of any asset bought or acquired after 19 September, 1985.

You are liable for CGT if your capital gains exceed your capital losses in any income year.

Any capital gain must be shown in your income tax return for that year. While you do not pay capital gains tax on your place of residence, investment properties are subject to the tax when sold.

Any investment property acquired on or after 1 October 1999 and held for at least one year, are taxed at only half of your capital gain.

This means that you are subject to a maximum tax rate of 24.25 per cent. In effect, this means if you are on the top tax rate of 48.5 per cent,you will only pay 24.25 per cent tax on any capital gain you make on the sale of an investment.

If you acquired your property before 1 October 1999 and have held it for at least one year before sellling it, you may choose to include in your assessable income either:

• half of the nominal gain; or
• the difference between the consideration on disposal and the indexed cost base frozen as at 30 September 1999

Get Your Tax Refund Early

Variations are commonly sought by investors who have undertaken a negative gearing program and who want to use the extra cash in their pay packet to help fund their interest expenses.

So if you can reliably estimate your income and expenses for this year, you can have less tax deducted from your pay now in lieu of getting a refund at the end of the financial year. It's not quite the same as getting a cheque for next year's refund now but it's close.

For example, if you have an annual gross income from your employer of $45,000, but estimate you'll make a $15,000 loss on an investment property, you can apply to have your tax payments calculated on an income of $30,000. That could cut your weekly tax payments by about $85.

Contact the Australian Tax Office for further information on Pay-As-You-Go (PAYG) withholding payments