Capital gains tax and depreciation effect on selling question

[natedog]

Hi All,

Have never sold an IP before but am considering it, and need confrimation of the below from the experts on here

Scenario..house built brand new 4.5 years ago..was an IP for 3 years before we moved into it for the last 1.5 years.

Depreciation was claimed for the 3 years it was an IP.

Built for $330k (including stamp duty on the land and stuff) claimed depreciation of $10k sell for $450k....assume $10k commission for the agent selling

So is this correct $450k-$10k agents commission -(($330k initial build price - $10k (depreciation)) = $120K CG used for calculating CGT?

then we take that ammount halve it = $60k(50% CGT discount for holding the investment for over 12 months) and as it was an IP for 2/3 of the time we have owned it..2/3 of $60k = $40k

then we pay marginal tax rate on the $40k?

is it as simple as this

Cheers,
Nathan

 

[jlamba]

Hi Nathan,

I'm no expert, I remember some time ago I was enquiring about this for my self.
For what its worth I think your calculations look correct.

 

[bene313]

looks about right nate.

 

[INXS]

If the 10k in depreciation relates to capital allowances (building depreciation) then 10k of the gain must be treated as taxable income. This 10k is then left out of the capital gain calculations. Also don't forget you can reduce the capital gain by including property holding costs (when you were living in it) in your cost base.