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Good records will save you money

keep good recordsCalculating capital gains tax (CGT) can be tricky at best. When it’s time to sell your investment property it might be evident how much capital gain you made from when you originally purchased it, but if you held the property for years, the only way you will know how much it really cost is by keeping good records.

Having all your paperwork in order will make sure you factor in all of the costs incurred that could reduce your CGT liability significantly. Particularly those you weren’t able to claim as a deduction or depreciation whilst you held the property.

Let’s look at the example below:

Mark and Melanie purchased a block of land in 2002 for $100,000.

  • $70,000 was borrowed on a 5-year 8%pa fixed interest loan.
  • They paid $880 per year on rates
  • In 2004, they built a house on the land for $130,000 plus a further $25,000 landscaping and a swimming pool.
  • From 2004 to 2013 they rented the house out to a young couple.
  • Additional $10,000 was spent in 2014 in refurbishments and sold it for $375,000.
  • $1,000 was spent on legal fees for the purchase and sale of the property.
  • 5% real estate agent commission was applied on the sale plus advertising costs of $1,500.
Cost of land in 1993 $100,000
Stamp duty on purchase $600
Legal fees on purchase and sale of property $2,000
Interest on borrowings $28,000
Property rates $4,400
Cost of building house $130,000
Landscaping and swimming pool $25,000
Refurbishments $10,000
Sales commission $9,375
Advertising / Marketing $1,500
Total cost of acquisition $310,875  
Final sale price  $375,000
Total receipt from sale  $375,000  
Net capital gain $64,125

Note: You cannot include any of the items listed in the table above for which you have already claimed a tax deduction, or for which you can still claim a deduction through an amended income tax assessment.

Over a 12-year timeframe most of this would have been forgotten, and the net capital gain would have been much higher. Mark and Melanie would have paid far more CGT than they should have.

If you require advice about how to save CGT on your investment property, speak to a Modoras Accountant today by calling 1300 888 803 or via email At the end of the day, if you sold your investment tomorrow will your records save you money or cost you thousands?

This article is published by Modoras Accounting (UMG) Pty Ltd ABN 81 601 145 215. While every effort is made to ensure that the information is accurate, users must be aware that some information may not be accurate or is no longer current. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.

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