3. Capital gains tax discount for individuals who were foreign-tax residents during the time they owned the property<\/strong><\/p>\nUp to 8 May 2012, any resident or foreign-tax resident individuals that held investment properties for at least 12 months before selling the asset were qualified for the 50 per cent CGT discount.<\/p>\n
The 50 per cent CGT discount is no longer available for foreign-tax residents from 9 May 2012.<\/p>\n
If an individual sells an investment property after 8 May 2012 while a foreign tax resident, and the property is expected to generate capital gains upon its sale, then it is recommended you obtain a market valuation as of 8 May 2012.<\/p>\n
This will allow the 50 per cent CGT discount to be applied from the date the property was purchased to 8 May 2012.<\/p>\n
If a market valuation is not obtained for an investment property as of 8 May 2012, the CGT discount percentage will then be recalculated, not taking into account the 50 per cent CGT discount for gains accumulated up to 8 May 2012.<\/p>\n
Additionally, if the market value of the investment property as of 8 May 2012 is equal to or higher than the actual selling price, then the foreign-tax individual will be entitled to the full 50 per cent CGT discount.<\/p>\n
4. The temporary absence rule<\/strong><\/p>\nWhen an investment property was a taxpayer\u2019s main residence for only part of the ownership period, then a partial main residence exemption is applied upon its sale.<\/p>\n
In this situation, the \u2018temporary absence rule\u2019 allows a taxpayer to choose to continue to treat the dwelling as their main residence for all or part of the period they did not reside in it.<\/p>\n
The temporary absence rule applies for the following:<\/p>\n
\n- The taxpayer can treat the dwelling as their main residence indefinitely if the property is not used for income producing purposes after the taxpayer moves out; or<\/li>\n
- The property can be treated as the taxpayer\u2019s main residence for a maximum period of six years while it is used for income-producing purposes during a single period of absence after the taxpayer moves out (e.g., it is rented out).<\/li>\n<\/ul>\n
5. Negative gearing, borrowing, or leveraging<\/strong><\/p>\nYour investment property is said to be geared when a loan is taken out to purchase a rental property.<\/p>\n
It is common for an Australian residential property to incur running expenses greater than the rental income received. If this is the case, a negative gearing loss arises.<\/p>\n
The taxable loss generated from the negative gearing can be offset against other assessable income, including employment income, therefore providing tax savings.<\/p>\n
These negative gearing losses<\/a> are available to accrue forward (over multiple tax years) and can be offset against Australian taxable income in the future, including:<\/p>\n\n- Australian business income<\/li>\n
- employment income<\/li>\n
- capital gains.<\/li>\n<\/ul>\n
For Australian tax residents, if you expect your rental property to generate a loss in the financial year, you can contact the tax office to reduce the amount of tax withheld from your salary (known as PAYG Withholding Variation), allowing for a cash flow boost.<\/p>\n
Disclaimer: All information provided is of a general nature only and does not take into account your personal financial circumstances or objectives. Before making a decision on the basis of this material, you need to consider, with or without the assistance of a financial adviser, whether the material is appropriate in light of your individual needs and circumstances. This information does not constitute a recommendation to invest in or take out any of the products or services.<\/p>\n<\/p><\/div>\n
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