It’s almost tax time. If you own an investment property and are thinking about selling, you will no doubt want to know the best ways to avoid or at least minimise Capital Gains Tax.

Leading property investment expert, Michael Yardney spoke with tax expert, Ken Raiss who shared a few strategies to consider.

Before we discuss how to avoid or minimise your Capital Gains Tax (CGT), let’s take a step back and outline how CGT is calculated.

If you own an investment property and decide to sell it, Capital Gains Tax is calculated based on the net sale price of the property minus your expenses. This gain is added to your income for the financial year (as well as the income of any other title holder) and the final figure is used to calculate the applicable tax.

What expenses can you include as deductions?

The list of allowable expenses is long. They include (but are not limited to) the following:

• Incidental costs like stamp duty, legal fees, some bank fees, buyers agent fees, advertising and marketing fees, and some travel expenses
• Ownership costs like property searches and inspection fees
• Improvement costs, including kitchen and bathroom renovations, flooring or essentially any improvements you have made on the property
• Title costs – legal fees

When selling, the costs associated with the sale, such as agent’s fees, styling, repainting etc. are used to reduce the gross selling price.

If you have owned the investment property for over 12 months, the capital gain can be reduced by 50%. However you would have to add back the benefit of any depreciation claimed during the ownership period.

You only pay Capital Gains Tax if you have made a profit

At the end of the day, if you have to pay CGT it means you have made a profit on the sale of your investment property, which is the goal of owning the property in the first place.

Some investors make a capital loss and therefore pay no CGT, but this is not something you would aspire to. If you do make a capital loss, the good news is that you can carry the loss forward to offset any future capital gains you make.

Click here to watch a five and a half minute video interview between Michael Yardney and Ken Raiss as they discuss this important topic in more depth. A must watch if you own an investment property or are thinking about investing.

It is important to note that this information is general in nature and intended for educational purposes only. Always seek independent advice before making any financial decisions about your own investments and taxes.