Capital gains tax (CGT)
The tax paid to government on the profit received when a property is sold for more than it cost to buy. In Australia, CGT is paid on investment properties and not on a taxpayer’s primary residence property. In addition, if the property had been owned by an investor for more than 12 months, only 50 per cent of the nominal capital gain (i.e. after allowing for associated costs that weren’t otherwise claimable) is included as assessable income to be taxed at the individual’s rate of taxation. This tax discount encourages investors to buy houses to get capital gains benefits rather than rental yield that, like money earned from a bank deposit or as dividends from shares, is taxed at 100 per cent of the investor's rate of income tax.