From $3,440 to $54,500: Mastering Your Property Tax Obligations

Your property tax could be as low as $3,440 or as high as $54,500

Today's post will be quite long because I found the topic SO INTERESTING that I included every detail to make sure you can understand too. 👉👈

Many people don't know how flexible and creative taxes can be.

To me, taxes are more like a form of art rather than science. If we gather all the information about tax documents, it could fill your entire bedroom. You might need another room for more documents. This means there are countless ways you can apply tax or tax returns depending on your situation.

The more your tax accountant knows, the better they can assist your case, helping you avoid overpaying taxes.

Tax Concessions on the Sale of Rental Property

The ATO allows a 50 percent CGT exemption (=50% dicount on tax) for any gains made on the sale of a rental property held for more than 12 months. If you haven't held the property for at least 12 months, you do not get this 50 percent CGT discount. The holding period starts from the date a contract becomes unconditional.

For example, if you purchase a property on June 1 with a 28-day finance clause, and your loan is approved in 14 days, the CGT purchase date is June 15. The same applies to the sale date.

Example

Let's say you made a $109,000 profit. Your taxable capital gain is $54,500, at your marginal tax rate. However, depending on the scenario, you might pay taxes anywhere from $3,440 to $25,615 (or $32,700 if owned in a company, which I don't recommend).

Scenarios

• If the property is owned by both you and your spouse, then it's $27,250 per person (taxable income: $54,500 / 2 = $27,250).

• If you limit your income in the year, the marginal tax will be lower. If you claim $27,250 as the only income for both yourself and your spouse, the tax will be $3,440 ($1,720 x 2). If one person earned the profit, it would be $8,181.

• If you have a business, you can reduce the salary you pay yourself in the year the capital gain is made. Drawings or loans you take can be treated as a complying Division 7A loan.

• If the property is owned by a company (not a base rate entity, as the income is passive rental income), the tax is 30% on $109,000, totaling $32,700. Companies do not get the 50% CGT discount.

• Note: Do not own real estate in a company structure. If you hold more than three properties, a trust is a much better option.

• If you own other assets with unrealized capital losses, it may pay to realize those losses in the same year.

• If none of the above applies, you'll be taxed at the marginal rate of 45%, plus a 2% Medicare levy, totaling 47%. Hence, you would pay $25,615 in tax.

Is it legal? Yes!

Is it within the tax framwork? Yes!

So should you do it? YESSSS

In conclusion 

if you made $109,000 and will pay tax anywhere from $3,440 to $54,500 (or $32,700 if owned by a company) depending on what tax strategies you use. You need to be proactive with the tax system to get the best advantage with property.

The more you study, the more you can discuss it with your tax accountant! 

Hope you have a wonderful day!💖