The Howard Government has recently introduced changes to the way Capital Gains Tax is charged in Australia.
Under the new regime capitals gains made by individual taxpayers shall now be subject to tax on only half of the gain which will significantly reduce the impact of taxation on investment assets.
The changes are a result of the business tax review known as the Ralph Report and the Government has introduced other changes including reducing the Corporate Tax Rate to 30% and allowing rollover relief on corporate takeovers and mergers.
As with all new schemes some benefits of the old regime will be lost however the overall impact is a significant improvement on the previous system.
The inflation growth component of capital gain which used to be tax free shall now be removed and subject to the 50% taxable portion instead.
In real terms these changes are great encouragement for investors to seek quality Australian assets that will out perform the inflation index over the long term.
Importantly for foreign investors is the benefit of any surplus interest or depreciation cost building up over time as a carried forward tax loss. Under the new system these losses are far more valuable now as every one dollar of tax loss can now offset two dollars of capital gain.
The result further improves the tax benefits that already existed for foreign investors and should provide great incentive to acquire Australian property.
For investors who have held property for many years you will be pleased to know that you will be able to choose between the old and new system and use the one that creates the least amount of tax liability when you sell your investment property.
We have updated our computer modeling to incorporate the recent changes and compare the new Capital Gains Tax calculation against the old system.
Should you wish to see how the changes affect your current property or your intended purchase, please contact the Singapore office and we will be pleased to provide you with a detailed analysis.
Continued reform of the Australian Taxation system is expected in order to make it internationally competitive for the global investment dollar.
