CGT is generally calculated by comparing the capital proceeds from a disposal with the property's cost base. The cost base can include the purchase price and eligible acquisition, ownership and improvement costs, reduced by amounts that must be excluded or adjusted under tax law. The contract price is not always the amount used for CGT purposes, particularly for related-party transactions or non-arm's-length arrangements.
An eligible individual may qualify for the main residence exemption for a home that is genuinely their principal residence, but the result depends on ownership, use, absences, rental periods, land size and other statutory conditions. A property that was rented, used to produce income, held through a company or trust, or subdivided may have a partial exemption or a different tax treatment. A trust's capital gain and any distribution to beneficiaries must be dealt with under the specific trust and tax rules.
Individuals and trusts may be eligible for the CGT discount if the legal requirements are met, including the relevant ownership period. Companies generally cannot claim the 50% CGT discount. A property development or subdivision can also produce ordinary income rather than a capital gain where the activities amount to a profit-making undertaking or business.
CMK Legal's property and conveyancing team can act on matters like this.
Keep records of the contract, purchase costs, improvements, periods of occupation and rental income. Before selling, obtain tax advice if the property has been rented, subdivided, held in an entity or used for more than one purpose.
Law referenced: *Income Tax Assessment Act 1997* (Cth), including the CGT provisions and main residence exemption rules; Australian Taxation Office guidance.