Capital Gains Tax (CGT) Valuation
Anyone who has sold real estate or a large asset will have heard of capital gains tax. As with all sorts of taxes and other financial matters, it’s important to have the right figures. This is how an accurate property valuation for capital gains tax can help.
But first, you should understand what capital gains tax is and what is required from the report and CGT property valuation service.
What is Capital Gains Tax (CGT)?
Capitals Gains Tax (CGT) is the tax that is applied to the profit you have made on the sale of an asset. Real estate investors will be very conscious of CGT when selling property.
A capital gain, which is the profit earned, is considered to be a part of your income. As such, any capital gains must be reported in your income tax return. To calculate how much is owed in CGT, the difference between the original purchase and the market value at the time of the sale needs to be determined.
With real estate, a valuation can be used to aid in the calculation of the taxable capital gain or a capital loss.
Conducting property valuations for tax purposes
When it comes to property valuations for tax purposes, a report should:
- be conducted by an independent party
- be objective, free from any bias or self-serving motivation
- have been produced using recognised and appropriate valuation methods
- be comprehensive, true, and accurate.
For a property valuation for CGT purposes, engaging with a Certified Practising Valuer (CPV) may be best.
What is retrospective valuation capital gains tax?
A retrospective valuation for capital gains tax is the process of finding out the value of a property when it was originally acquired. If there is no original sale price to reference, whether because this was originally a transfer, the records were lost or for another reason entirely, then a retrospective CGT valuation is produced.
A valuer uses past data to create a backdated valuation report of the asset’s historical market value. A retrospective capital gains tax property valuation may also be used to increase the precision and accuracy of calculating your capital gain or loss.
Factors that impact Capital Gains Tax Property Valuations
When producing a property valuation report there can be over 200 factors that a valuer must consider to ensure their work is as accurate as possible. These include:
- Condition
- Land size
- Site orientation
- Local amenities
For capital gains tax valuations, there are other more specific factors. One of which is the date when the property was originally acquired. Exemptions, discounts and how CGT is calculated will all be affected by when the asset was acquired. How long it has been the property of the current owner and whether served as the main residence of the owner are also important considerations.
Our CGT property valuation services in Melbourne
Melbourne Property Valuers Metro has been conducting valuations for tax purposes for decades. Our senior valuers are highly experienced with each having over 20 years of experience in helping clients determine their capital gains tax liabilities.
Our valuers are:
- API-accredited
- Local to the Melbourne metropolitan area
- Specialists in residential, commercial, and industrial property
Frequently Asked Questions
Q: Are valuation fees deductible for CGT?
Yes, as this falls under the category of legal, conveyancing and appraisal fees, it may be tax deductible. Speak to your accountant for more precise information about your situation.
Q: What is the 50% rule for capital gains?
In Australia, if you have owned a property for at least 12 months, you will be eligible for a 50% discount from your capital gains tax. This is known as the 50% rule for capital gains.
Q: What is the 6 year rule for capital gains tax in Australia?
When a Primary Place of Residence (PPOR), or in other words your main home, is turned into a rental property, you have a 6-year window of being exempt from CGT. This can be reset by moving back in and officially returning the home to its main residence status before renting it out again.
Get in touch with our expert CGT team
If you would like to know more about having a property valuation for capital gains tax purposes, contact the team at Melbourne Property Valuers Metro.
Reach our friendly CGT experts by calling (03) 9021 2007 or by completing our contact form below.