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masaquib(Initiate)Initiate
30 June 2022

Every year I claim depreciation deduction in my tax return on my investment property. Now I sold the property do I need to add back the depreciation deduction on my capital gain. Say bought for $400,000 & lived in the property 2 years & sale appraisal at the time become investment property was $500,000 & rented for 5 years. Later sold the property after all the cost $600,000 and last five years claimed depreciation $25,000. So sold $600,000 - $500,000 = CGT $100,000 plus $25000 depreciation claimed = $125,000 and 50% discount for holding 12 months, final CGT is $62,500?

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732 views
2 replies

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Most helpful replyATO Certified Response

JodieR_ATO(Community Support)Community Support
ATO Certified Response4 July 2022

Hi @masaquib,


First up, did you buy another property when you first started renting this property out? If not you can continue main residence rule for up to 6yrs without incurring CGT. If you bought another property then you'd need to select one property that's liable for CGT.


If this is the case, you could choose property A to be looked at for CGT from the time you purchased your 2nd property. The property first used to produce income rule is used to establish your cost base. Then you can use partial exemption. This will look at the period it was not your main residence over the period of ownership x your total capital gain.


You can also look at our Karl and Louisa example, this will assist you in working out your capital gain or loss.

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Most helpful replyATO Certified Response

JodieR_ATO(Community Support)Community Support
ATO Certified Response4 July 2022

Hi @masaquib,


First up, did you buy another property when you first started renting this property out? If not you can continue main residence rule for up to 6yrs without incurring CGT. If you bought another property then you'd need to select one property that's liable for CGT.


If this is the case, you could choose property A to be looked at for CGT from the time you purchased your 2nd property. The property first used to produce income rule is used to establish your cost base. Then you can use partial exemption. This will look at the period it was not your main residence over the period of ownership x your total capital gain.


You can also look at our Karl and Louisa example, this will assist you in working out your capital gain or loss.

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How to calculate Depreciation on property capital gain | ATO Community