Before you sell: a tax checklist for property investors
Selling an investment property is one of the most significant financial events in an investor's life. Being prepared from a tax perspective can save you tens of thousands of dollars.
1. Gather all your ownership records
Before engaging an agent, collect:
- Original purchase contract and settlement statement
- All invoices for capital improvements (extensions, renovations, significant upgrades)
- Depreciation schedules you have used during ownership
- Property management statements for the full ownership period
- Any legal costs, stamp duty receipts, or financing costs from purchase
2. Review your depreciation schedule
Contact your quantity surveyor to review your existing depreciation schedule:
- Is it current and up to date?
- Have any assets been replaced or removed that should be scrapped?
- Are there any final-year depreciation claims to maximise before settlement?
3. Consider scrapping assets before sale
If you are renovating before sale, or if the buyer intends to renovate after settlement, the old assets in your depreciation schedule can be written off (scrapped) before or at settlement. This gives you a final deduction for their remaining book value.
4. Get a cost base report
A quantity surveyor can prepare a CGT cost base report that documents:
- All Division 43 capital works claimed (which reduce your cost base)
- All capital improvements that can be added to your cost base
- Original construction costs where records are incomplete
5. Consider the timing of settlement
The date of settlement determines which financial year your capital gain falls in. If you have other significant income in one year, settling in the following year may reduce your effective CGT rate. Discuss timing with your accountant before signing contracts.
6. Think about the 12-month CGT discount
If you have held the property for less than 12 months, the 50% CGT discount does not apply. The gain is taxed at your full marginal rate. If you are close to the 12-month mark, waiting may save significant tax.
7. Check for any outstanding deductions
Can you claim:
- Any missed depreciation through an amended prior year return?
- Any costs incurred in the year of sale that relate to the rental period before settlement?
8. Brief your accountant
Send your accountant a complete summary of the sale — sale price, settlement date, all costs related to the sale — well before your tax return is due. A last-minute summary increases the risk of errors in your CGT calculation.