Record Keeping for Real Estate
Generally, real estate which has been used as a main residence is exempt from Capital Gains Tax (CGT). Where it is used to generate income, such as an investment property, it will be fully subject to CGT. But what happens in the following scenarios?
- A property is purchased and lived in as a main residence then rented as an investment property for a period and eventually sold
- A property is purchased and immediately rented but after a period becomes the owners main residence and then eventually sold
- An owner has multiple properties and may spend various periods in all, with other times generating rental income and others being vacant
- An owner rents out their main residence and decides to rent elsewhere or mover overseas
- An owner rents out part of their main residence through a platform such as Airbnb or Stays
The answers can be obtained by working through the tax law’s but only if proper records have been kept. All property owners have a responsibility to keep adequate records, not only of the costs of acquisition and disposal but also a detailed history of its use over the ownership period.
Quite often we are asked to advise on the likely tax outcome of a property sale and we can only do that if adequate records have been kept.
The ATO receives information from State Governments regarding all property transactions and as such it is easy for the ATO to instigate an audit. If proper records are not kept you increase the risk of errors being made and penalty tax and interest applying.
Contact CrossCorp if you are in doubt as to how the Tax Laws apply to you.
