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Does capital gain earned threaten tax refund from operating losses?

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  • Does capital gain earned threaten tax refund from operating losses?

    Hi there

    A simple question:

    I'm considering selling a property for $650k which I brought for $300k a 6 years ago, so making a $350k capital gain. If I sell before end of March 2018, does the capital gain earned from this sale threaten any tax refund from operating losses (my rental income minus expenses) across my property portfolio? All up it's likely I'll receive $15k refund from rental income minus losses this financial year... it would be a shame for this to slip away!

    Appreciate your advice.

    Thanks, WFA

  • #2
    Hi WFA,

    As with a lot of tax questions it depends.

    If the capital gains are somehow taxable (rezoning, tainted by developer, subdivided, your intention was to 'buy, do up and sell for a profit' - are some examples of how could be taxable), then the capital gain would become income and offset any rental loss.

    Depreciation recovery on buildings is another possibility, but not if your timeframe is correct (it stopped 1/4/11).

    You will still return your normal income less expenses in the tax year, and complete normal tax returns. So if you have run at a loss, and set up so that the loss can offset your personal income, and the capital gain isn't taxable, then you should get your normal tax refund as long as your income has been taxed right throughout the year.

    Ross
    Book a free chat here
    Ross Barnett - Property Accountant

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    • #3
      Hi Rosco,

      Thanks for your reply, v helpful

      I’ve check my dates and the property was actually purchased 4 Oct 2011. So I’m assuming this still makes it clear of the depreciation recovery date you mentioned?

      Regards, wfa

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      • #4
        yes, as you can't have depreciated the building.

        Ross
        Book a free chat here
        Ross Barnett - Property Accountant

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