So what does that mean for Australia’s 1.9 million rental property owners?
As the tax law currently stands, if you sell a rental property for more than you paid for it, you pay tax on the increase in value – i.e. the capital gain.
If you have owned that property for more than 12 months you get a 50% discount on your capital gains tax.
(Insert disclaimer here: of course with tax it’s more complicated than we can explain in two sentences so check out the ATO website for all the nitty gritty detail – or better yet talk to your accountant!).
Options being considered by the government would potentially reduce the 50% discount, or a discount may only apply after you’ve held your property for several years or more, reports the Australia Financial Review.
Not surprisingly property groups are trying to hose down the possible changes.
Smart Property Investment quotes Property Council of Australia chief executive Ken Morrison: “While there are conflicting media reports, we urge the government to be extremely cautious if it is considering changing the CGT discount. The CGT discount is recognition that you should not tax people for inflation – inflation driven capital growth is not real growth and investors should not be taxed for it.”
Sounds like fighting words… albeit using the language of diplomacy.