Arnold
CibbuanoCapital Gains Tax for Company Titled Property
July 3rd 2006 00:45
Jon asked:
“How is the capital gains tax of a property affected by placing it within a company structure?”
Firstly for the newbies, what is capital gains tax?
Capital gains tax is a tax applied by the federal government that is pay on any capital gains you’ve made at the end of a capital gain event within a given financial year. An example of a capital gain event could be the sale of a property or shares. It is included in your annual income tax return, so it’s considered as a component of you’re income tax. The tax is applied on your net capital gain at the appropriate marginal tax rate for your tax bracket. Capital gains can be calculated by taking the total capital gains for the financial year, reducing that value by any capital losses you’ve sustained over the course of holding the investment and applying any relevant concessions of discounts which may be applicable to your particular situation.
Of course, tax exemptions means more of your profits staying your back pocket rather than going to the government which is where reading the Australian Taxation Department’s fine print and figuring out how any exemptions may work in your favour when purchasing investment property.
So to answer Jon’s question;
The 100 percent capital gains tax exemption is not available for homes titled under a trust fund or a company. To be eligible for a 100 percent tax exemption you must own the property as an individual or joint title and the house must be classed as your primary residence. If you ever earned a taxable income from the property in the period of ownership (say you rented a room to a boarder and declared the rent as income), the 100 per cent tax exemption will not be available.
The 50 per cent capital gains tax exemption is available for the sale of a joint, individual or trust titled property which has been owned for at least 12 months. It is not available for company titled properties or their shareholders.
Unfortunately when it comes to capital gains taxes, the Tax Department has a company’s hands tied. There are no exemptions or concessions available for company titled properties and taxes are calculated at the full gross capital gain.
“How is the capital gains tax of a property affected by placing it within a company structure?”
Firstly for the newbies, what is capital gains tax?
Capital gains tax is a tax applied by the federal government that is pay on any capital gains you’ve made at the end of a capital gain event within a given financial year. An example of a capital gain event could be the sale of a property or shares. It is included in your annual income tax return, so it’s considered as a component of you’re income tax. The tax is applied on your net capital gain at the appropriate marginal tax rate for your tax bracket. Capital gains can be calculated by taking the total capital gains for the financial year, reducing that value by any capital losses you’ve sustained over the course of holding the investment and applying any relevant concessions of discounts which may be applicable to your particular situation.
Of course, tax exemptions means more of your profits staying your back pocket rather than going to the government which is where reading the Australian Taxation Department’s fine print and figuring out how any exemptions may work in your favour when purchasing investment property.
So to answer Jon’s question;
The 100 percent capital gains tax exemption is not available for homes titled under a trust fund or a company. To be eligible for a 100 percent tax exemption you must own the property as an individual or joint title and the house must be classed as your primary residence. If you ever earned a taxable income from the property in the period of ownership (say you rented a room to a boarder and declared the rent as income), the 100 per cent tax exemption will not be available.
The 50 per cent capital gains tax exemption is available for the sale of a joint, individual or trust titled property which has been owned for at least 12 months. It is not available for company titled properties or their shareholders.
Unfortunately when it comes to capital gains taxes, the Tax Department has a company’s hands tied. There are no exemptions or concessions available for company titled properties and taxes are calculated at the full gross capital gain.
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