Why Capital Gains Tax Reports Matter (and How We Can Help)

We were recently contacted by a client who needed a property valuation to support a capital gains position—specifically, to claim capital costs (less depreciation) against capital gains. Capital gains tax (CGT) applies to the profit made from selling an asset such as property, and the amount payable can change significantly depending on what costs and deductions are correctly captured.

A common misconception is that CGT is always straightforward. In reality, several factors can reduce the CGT payable on sale—such as eligible renovations, depreciation, and capital losses—and a comprehensive CGT report helps identify and document those factors properly.

A CGT report can save you money

One of the main reasons CGT reports are commissioned is to ensure you’re not paying more tax than necessary. A simple CGT calculation may overlook renovation costs, depreciation, or capital losses that can be applied against gains. A qualified professional can assess your property methodically and prepare a report that reflects the full picture.

Understanding depreciation deductions

Depreciation can be used to offset tax annually and can also influence CGT outcomes over the life of the asset. Depreciation generally falls into two categories: Plant & Equipment (Division 40) and Capital Works (Division 43). 

Plant & Equipment (Division 40) includes removable items such as air conditioning, blinds, appliances, and furnishings. Deductions depend on the effective life of each asset as defined and updated by the tax commissioner.

Capital Works (Division 43) relates to “fixed” items and structural improvements—walls, flooring, built-in joinery, bathrooms, driveways, and renovation/extension works. These assets can also be depreciated annually and affect the property’s overall tax position when you sell. 

Tax depreciation schedules

A detailed tax depreciation schedule documents Division 40 and Division 43 assets and their depreciation. Maintaining this (and updating as needed) helps maximise deductibility over time and can contribute to lowering CGT outcomes by clearly supporting eligible deductions. 

Offsetting capital gains with capital losses

Capital losses may also reduce CGT payable. If you have eligible capital losses (current year or prior years), they can potentially be applied against capital gains, and guidance is often needed to understand the most tax-effective order in which they’re applied.

How we can help

Our capital gains tax reports are designed to help ensure the CGT position is accurate and properly supported. We assess the property and relevant assets, account for depreciation and eligible works, and provide a clear, comprehensive CGT report to support decision-making and compliance.