Capital gains tax (CGT) is a sum of money paid to the tax office, calculated based on the amount of profit your investment has produced.

But how exactly is CGT calculated – and what are the common mistakes that property investors make when trying to work out their CGT obligation?


>> Record keeping

You must keep all documents – every transaction, event or circumstance — that may be relevant to working out whether you’ve made a capital gain or loss from an asset. This includes but is not be limited to purchase and sale contracts, additions to the asset, and bank and loan statements. It’s simple to stay ahead by keeping good records. And if you can’t substantiate it, don’t claim it.

>> Carried forward losses

There is no time limit on how long you can carry forward a net capital loss and it can be deducted against capital gains in future years. This could help to reduce the tax you pay in future years and assist any beneficiaries you’re leaving assets to. Be sure to keep all records.

>> Cost base & depreciation calculations

CGT legislation allows for the depreciation that is claimed over the life of the property, to be deducted from the cost base of the asset when calculating capital gain. The cost base is the purchase price, plus or minus additional capital expenditure or depreciation claimed. A mistake investors regularly make is coming up with a cost base that does not take depreciation into account. Property investors need to be aware of this, as the longer the property is owned, the larger the mistakes that can be made.

For more tips, advice and guidance around capital gains tax, and all other taxing issues including negative gearing, check out our comprehensive tax mini guide in the August 2019 edition of

Your Investment Property magazine.

It’s the only tax guide you’ll need this end of financial year!

On sale at news-agents and Coles, from July 4 to July 30 - or download the magazine now.