We were recently contacted by a client who requested a property valuation for the purpose of claiming capital costs minus its depreciation against capital gains. As you may know, capital gains tax (CGT) is the tax paid based on the profit you make from the sale of an asset, such as property. You may be asking yourself why you need a report to determine your CGT, well, because there are several factors that can actually reduce the amount of CGT you will have to pay when it comes time for a sale — and a comprehensive CGT report will help determine those factors. Keep reading to discover why CGT reports are important and how our construction estimating services can help you.
A CGT report can save you money
The most important and attractive reason CGT reports are commissioned is to save the owner money. A straightforward CGT payment may not consider (for a property) renovations, depreciation or capital loss — all of which are elements that can be put against your capital gains tax. A qualified and experienced surveyor like those at Accent Estimating can thoroughly evaluate your assets and ensure a comprehensive and methodical CGT report is created.
Understanding depreciation deductions
A property’s depreciation can be used to offset your yearly tax. Property depreciation can be categorised into two groups: plant and equipment deductions, and capital works deductions.
Plant and equipment assets (Division 40)
Plant and equipment assets, also known as Division 40 assets, relate to anything on the property that can be removed easily, so to speak. This includes air conditioning, blinds/drapes, appliances (white goods or those used for cooking, for example) and furnishings just to name a few. The quality of such products will determine how much can be deducted annually, each type of product has an effective life which is established and regularly updated by the tax commissioner.
Capital works assets (Division 43)
Capital works assets (or Division 43 assets) encompasses anything that is “nailed down” to your property as well as any renovation/extension/refurbishment work that it has undergone. Walls, flooring, integrated/built-in cupboards or wardrobes, showers/baths and driveways are all examples of capital works assets. As with plant and equipment assets, the depreciation of these assets can be deducted from your yearly tax and will ultimately affect the sale of your property when the time comes to sell.
Tax depreciation schedules
One of our construction estimating services is the creation of detailed and professional tax depreciation schedules which can outline the depreciation of all your Division 40 and Division 43 assets. We highly recommend doing this annually to ensure you’re maximising the deductibility of your assets; offsetting the decline of your property and its assets against your income will eventually help decrease your CGT.
Offsetting your capital gains with a capital loss
Another factor that will minimise your CGT upon sale is capital loss offset. If you have claimed any capital loss over the years, then you may be eligible to offset it against your capital gains. It is usually recommended to apply any capital losses from the current year first before losses from the previous years in addition to any losses on assets sold after less than 12 months to minimise your CGT.
How we can help
Our capital gains tax reports are designed to ensure you pay the lowest CGT possible upon selling a property. Our professionals will take into account all of the above information and factors to estimate an accurate and comprehensive CGT value. Our service includes a complete audit of your property and all applicable assets in order to ensure a reliable figure.
Australia-wide construction estimating services
Accent Estimating is a full-service estimation and quantity surveying business offering premium and professional construction estimating services for residential and commercial sectors.
Whether you’re looking to minimise your capital gains tax, gain an accurate estimation for a property renovation or build, or require assistance with a series of financial construction reports such as council cost reports or bank finance reports, our professional and experienced estimators can help you. Our unique approach to these services allows us to conduct our business remotely so we can still help you regardless of location.
If you are in need of a capital gains tax report or require one of our other services, then please give us a call on 0413 953 869 or fill out our online contact form today.