Tax Depreciation & Capital Gains Tax (CGT) – How They Work Together

1. How Does Tax Depreciation Affect Capital Gains Tax (CGT)?

Short Answer:

Claiming Capital Works (Division 43) depreciation reduces your property’s cost base, which may increase your CGT liability when you sell.

How CGT & Depreciation Work Together:

✔ Capital Works (Division 43) deductions reduce your property’s cost base.
✔ Plant & Equipment (Division 40) depreciation does not affect CGT calculations.
✔ Careful tax planning can help balance depreciation benefits with future CGT.

📌 Get a CGT & Depreciation Tax Strategy: Speak to an Expert

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2. Can I Still Claim Depreciation If I Plan to Sell My Property?

Short Answer:

Yes! Even if you plan to sell, claiming depreciation provides immediate tax benefits, which often outweigh future CGT liabilities.

Why Depreciation is Still Worth Claiming:

✅ Increases cash flow while you own the property.
✅ CGT is only payable when you sell – depreciation benefits are immediate.
✅ Many investors use depreciation savings to reinvest or reduce debt.

📌 Maximise Your Depreciation Before Selling: Request a Depreciation Report

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3. What Are the Main Capital Gains Tax Exemptions?

Short Answer:

Some investors may be eligible for CGT exemptions or discounts, reducing their tax liability.

Common CGT Exemptions & Discounts:

✔ Main Residence Exemption – No CGT if the property was your primary residence.
✔ 50% CGT Discount – If you hold the property for more than 12 months (for individuals & trusts).
✔ Small Business CGT Concessions – Available for eligible commercial property owners.

📌 Check If You Qualify for CGT Exemptions: Speak to a Tax Specialist

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4. How Does CGT Apply to Investment Properties vs. Commercial Properties?

Short Answer:

CGT rules differ for residential and commercial investment properties, with some additional concessions for businesses.

CGT Differences Between Residential & Commercial Properties:

✅ Investment Properties – Standard CGT rules apply, including discounts & exemptions.
✅ Commercial Properties – Small business CGT concessions may apply.
✅ Short-Term Rentals & Airbnb – CGT rules depend on how the property was used.

📌 Get CGT Advice Based on Your Property Type: Request a Consultation

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5. Can I Reduce CGT by Updating My Tax Depreciation Report?

Short Answer:

Yes! Keeping your depreciation schedule updated ensures you are maximising deductions before selling, allowing for better tax planning.

How to Minimise CGT with Strategic Depreciation:

✔ Claim all available depreciation deductions before selling.
✔ Plan renovations & upgrades strategically.
✔ Work with a tax specialist to optimise CGT & depreciation claims.

📌 Get an Updated Depreciation Schedule Before Selling: Request a Quote

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6. What Happens to Depreciation When Transferring or Inheriting a Property?

Short Answer:

When a property is inherited or transferred, CGT and depreciation rules may vary depending on the circumstances.

Key CGT & Depreciation Considerations for Transfers:

✔ Inherited Properties – CGT may apply based on the deceased’s acquisition date.
✔ Transfers Between Family Members – The ATO may apply market value substitution rules.
✔ Gifting a Property – CGT is usually calculated as if the property was sold at market value.

📌 Need CGT & Depreciation Advice on Transfers? Speak to an Expert

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7. What Should I Consider Before Selling an Investment Property?

Short Answer:

Before selling, investors should evaluate their depreciation claims, CGT liabilities, and any applicable exemptions.

Pre-Sale Tax Depreciation & CGT Checklist:

✅ Review past depreciation claims & ensure accuracy.
✅ Check eligibility for CGT exemptions or discounts.
✅ Consult a tax professional for optimal tax structuring.

📌 Get a Pre-Sale Depreciation & CGT Review: Request a Consultation