What you can claim in tax deductions when selling a property is a question that we’re often asked here at Upside Realty. Below is your guide to navigating deductibles if you sell a house in Australia:
You’re not eligible to make deductions on your primary residence
When you sell your main residence, you’re not liable for capital gains tax, but you also can’t make any tax deductions. According to the ATO,
“Generally, you don't pay capital gains tax (CGT) if you sell the home you live in (under the main residence exemption). You also can't claim income tax deductions for costs associated with buying or selling your home.”
This may change if you live in a house you’ve previously rented or vice versa, and also if you use any part of the house to generate income – you’ll be liable for a capital gains tax for the portion of the time that you lived there:
It’s important to hang on to any records, receipts, and invoices relating to your house – if you do decide to rent all or part of it you’ll pay the right amount of tax for the period for which it’s been rented.
If you’re selling a rental property, you can make deductions
This all changes if you’re selling an investment property since these properties attract capital gains tax (CGT) – one of the costs of selling a property to factor in when you’re planning your next move. When you sell these properties, you need to establish the cost base (generally the amount you acquired the property for), which can include other costs associated with buying the property, holding and selling it – these are your deductions.
You may be able to include in the cost base any payments you’ve made towards the maintenance and upkeep of the property while it is being rented, called capital expenses. These can reduce the amount of CGT you’re liable for since it narrows the gap between the cost of the property when you purchased it and the amount for which you sell it.
Capital expenses include:
- Conveyancing costs paid to a conveyancer or solicitor
- Title search fees
- Private appraisal fees (when conducted by a solicitor)
- Stamp duty on the transfer of the property
Note that any real estate management fees don’t factor into capital expenses. Once the cost base is established, then the difference between that and the sale price is used to calculate your tax liability. Importantly, you can only claim for costs incurred while the property was being used to generate income – so, if you renovated before renting the property, or if you made improvements while living there, these costs aren’t eligible deductions.
If you make a capital loss, you may be able to use this to offset other capital gains you’ve made throughout the year.
Don’t forget to speak to your tax adviser
It’s important to speak to your tax agent, who will be able to advise you on your tax responsibilities according to your specific circumstances.
Ready to sell? Request a free online property value report, which takes just 30 seconds to claim but will give you an in-depth look into property sales in your area for a rough idea of the potential value of your home.