Selling a Property? Here's What You Should Know About Capital Gains Tax and Depreciation Schedules
- johnry8
- 2 days ago
- 2 min read
Thinking of selling your investment property? Capital Gains Tax (CGT) can take a significant portion of your profit if you’re not prepared.
Many property owners overlook the impact of a depreciation schedule when selling. While it's commonly used for claiming deductions while you own the property, it also affects how much tax you pay at the time of sale. Understanding how these two work together can help you avoid surprises and make smarter decisions.
Understanding Capital Gains Tax
When you sell a property for more than you paid for it, the profit you make is generally considered a capital gain. This gain is added to your assessable income and taxed accordingly.
Here’s what you need to know:
If the property is your main residence, it’s usually exempt from CGT.
If it’s an investment property, CGT will likely apply.
If you’ve owned the property for over 12 months, you may be eligible for a 50% discount on the capital gain.
To reduce your CGT, keep clear records of your purchase price, legal fees, stamp duty, renovation costs and the selling costs. All of these contribute to your cost base, which reduces your overall gain.
How Depreciation Schedules Come into Play
A depreciation schedule outlines how much value your property and its assets lose over time. It’s a helpful tool for claiming deductions each year, but it also matters when you sell
.
Here’s why it’s important:
Any capital works deductions you’ve claimed over the years reduce your cost base.
Could potentially help us lower your taxable position, and thus lower your overall tax liabilities.
Even if you haven’t claimed depreciation before, you can still get a schedule prepared before selling. It helps your accountant work out accurate figures and ensures you don’t miss out on deductions or end up overpaying tax.
Mistakes to Avoid
We often see property owners make these common mistakes:
Not getting a depreciation schedule because they’re about to sell
Losing receipts for renovations or improvements
Assuming CGT doesn’t apply just because they lived in the property part of the time
If your property was used to earn income at any point, even just short-term rental, CGT may apply.
When to Ask for Help
Selling a property is a big step. If it was used for investment or rented out at any time, it’s best to speak with a tax professional. They can help you figure out your CGT obligations, whether you should get a depreciation schedule, and how to avoid paying more than you need to.
Even if the property has already been sold, it’s not too late to organise a schedule or review your cost base.
Looking to Make the Most of Your Property Sale?