Eddie is an Australian resident for tax purposes and is thinking of buying an investment property next month and then selling it after 3 years. Eddie believes that the regular income from the property rent will just cover all the outgoings (Maintenance, real estate agent commission, interest on loans, municipal rates, etc). What is worrying Eddie is capital gains tax. Explain in straight-forward terms how the tax will apply

• In the event there will be a capital gain on re-sale
• In the event there will be a capital loss on resale.

Also, explain the more rare possible event that neither a capital gain nor a loss will apply.

Finally, Eddie just said on the telephone that he may even sell the property off in less than one year if the real estate market continues to boom.

Answer rating: 100% (QA)

Capital gain is calculated as Sale price of property minus cost of property Here major improvements ... View the full answer