Example 54 shows how you would calculate your capital gain on the sale of your rental property.
The sample worksheet (PDF 94KB)This link will download a file shows how you would complete the Capital gain or capital loss worksheet for this example.
Example 54: Sale of a rental property
Brett purchased a residential rental property on 1 July 1998. The price he paid was $150,000, of which $6,000 was attributable to depreciating assets. He also paid $20,000 in total for pest and building inspections, stamp duty and solicitor’s fees.
In the next few years, Brett incurred the following expenses on the property:
interest on money borrowed |
$10,000 |
rates and land tax |
$8,000 |
deductible (non-capital) repairs |
$15,000 |
Total |
$33,000 |
Brett cannot include the expenses of $33,000 in the cost base, as he was able to claim a deduction for them.
When Brett decided to sell the property, a real estate agent advised him that if he spent around $30,000 on major structural improvements, the property would be valued at around $500,000. The major structural improvements were completed on 1 October 2019 at a cost of $30,000.
On 1 February 2020, he sold the property for $500,000 (of which $4,000 was attributable to depreciating assets).
Brett could not claim any capital works deductions for the original construction costs, as construction of the property began before 18 July 1985. However, he could claim a capital works deduction of $254 ($30,000 × 2.5% × 124 ÷ 366) for the major structural improvements.
For information about capital works that qualify for a deduction, see Rental properties 2020 (NAT 1729). For information about how capital works deductions affect the CGT cost base, see Cost base adjustments for capital works deductions.
This is Brett’s only capital gain for the year, and he has no capital losses to offset from this income year or previous years.
Brett works out his cost base as follows:
purchase price of property (not including depreciating assets) |
$144,000 |
plus pest and building inspections, stamp duty and solicitor's fees on purchase of the property |
$20,000 |
capital expenditure (major structural improvements) $30,000 less capital works deduction $254 |
$29,746 |
real estate agent’s fees and solicitor’s fees on sale of the property |
$12,500 |
Cost base unindexed |
$206,246 |
Brett deducts his cost base from his capital proceeds (sale price):
proceeds from selling the house (not including depreciating assets) |
$496,000 |
less cost base unindexed |
$206,246 |
Equals |
$289,754 |
He decides the discount method will give him the best result, so he uses this method to calculate his capital gain:
$289,754 × 50% = $144,877
Brett writes $144,877 at A item 18 on his tax return (supplementary section).
Brett writes $289,754 at H Total current year capital gains item 18 on his tax return (supplementary section). Brett must also make balancing adjustment calculations for his depreciating assets. Because he used the property 100% for taxable purposes, he will not make a capital gain or capital loss from the depreciating assets.
End of example