Browse Forums Home Finance Re: Capital gains tax 2May 03, 2010 8:44 pm In a nutshell, any property you sell which is not your principal place of residence - you will be charged CGT on the profit. Costs like real estate agents fees, conveyancing etc will be deducted before arriveing at the figure you will be taxed on. If you have held the property for over 12 months you will be charged CGT on 50% of the profit (on 100% of it if its held for < 12 months) and this will be charged at your top tax rate - so the actual amount will vary depending on your income but at most will be around 47c in the dollar, that being Australia's current top tax rate. If the property is owned in joint names, each party will be charged on their portion at their top tax rate so it is possible that one party could pay little or no tax depending on their income - for example if they were a SAHM or a full time student. In any case, the absolute most you will pay, presuming you have held property for over 12 months, is still less than a quarter of the profit. (ie 47% of half the profit) Hope this helps Re: Capital gains tax 3Jun 06, 2010 11:21 pm I have a question on a similar vane. Brought my house in 2000, lived in it until 2007 at which point I moved O/S on a 4 year contract so rented it out. Will return in early 2011 however the missus is talking about up sizing. In this case do we get hit with capital gains tax? If so is it based on the purchase price in 2000 or some calculated value circa 2007? Also are there any special provisions for situations where we were renting out what would have otherwise been our primary property? Re: Capital gains tax 4Jun 06, 2010 11:40 pm Helyn In a nutshell, any property you sell which is not your principal place of residence - you will be charged CGT on the profit. Costs like real estate agents fees, conveyancing etc will be deducted before arriveing at the figure you will be taxed on. If you have held the property for over 12 months you will be charged CGT on 50% of the profit (on 100% of it if its held for < 12 months) and this will be charged at your top tax rate - so the actual amount will vary depending on your income but at most will be around 47c in the dollar, that being Australia's current top tax rate. If the property is owned in joint names, each party will be charged on their portion at their top tax rate so it is possible that one party could pay little or no tax depending on their income - for example if they were a SAHM or a full time student. In any case, the absolute most you will pay, presuming you have held property for over 12 months, is still less than a quarter of the profit. (ie 47% of half the profit) Hope this helps when you say profit, does it mean if i buy the house at $300 000 and sell it for $350 000, i will pay tax on $50 000. and it will be at 47%??? if i enroll as a full time student in january and sell my house around march(still as a full time student) and then withdraw end of the semester. will i pay no tax and will not be considered to have ** the tax office? VICTORY 1800, EN-SUITE, DOUBLE GARAGE, FAMILY ROOM AND ALFRESCO Land Settled: 20 July 2010 Site Scrap: 30 August 2010 Slab Pour: 20 September 2010 Frame Complete: 23 September 2010 Fascia and Gutters: 28 September 2010 Roof Complete: 06 October 2010 Lock-up complete: 28 October 2010 Plaster complete: 29 October 2010 Fix-out complete: 22 Nov 2010 PCI 7 FEBRUARY 2011 Re: Capital gains tax 5Jun 06, 2010 11:56 pm Yes, in the example you give, the profit would be considered as $50,000 minus real estate fees, conveyancing fees etc. If you have held the property for over 12 months and your top tax rate is 47% you will pay CGT on half the profit, ie on 25,000 (minus fees etc) at 47%. On the whole $50,000 if you held it for less than 12 months. If your top tax rate is less you will pay at that lesser rate - the rate is worked out on your tax rate for that financial year - if you didnt work for 3 months because you were a full time student obviously that will lower your years income and probably your tax rate. So sometimes you can pay less CGT by selling in the next financial year if your income in that year is going to be considerably less than the year before - say, if you are leaving work to study or retiring etc. The CGT gets charged when you do your tax at end of financial year, not when the property is sold. We sold a property in about March, estimated the CGT, and then put that money on mortgage of our residential place, redrawing it when we had to pay the CGT - wasnt actually due until about March of following year. Saved us a lot in interest in the interim Re: Capital gains tax 6Jun 07, 2010 8:36 am AJW I have a question on a similar vane. Brought my house in 2000, lived in it until 2007 at which point I moved O/S on a 4 year contract so rented it out. Will return in early 2011 however the missus is talking about up sizing. In this case do we get hit with capital gains tax? If so is it based on the purchase price in 2000 or some calculated value circa 2007? Also are there any special provisions for situations where we were renting out what would have otherwise been our primary property? There is an exemption - you can live elsewhere for up to six years, then as long as you move back in, you won't cop GCT when you later sell. If you don't move back in before you sell, the exemption won't apply. Go read the ATO's website for all the info - far better than "asking the internet". From http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm: Quote: If you use the dwelling to produce income – for example, you rent it out or it is available for rent – you can choose to treat it as your main residence for up to six years after you cease living in it. If you're still unsure, ring the ATO and ask them - they can give you free advice plus send you whatever publications there are on the subject. Or you can pay for advice from a registered tax agent. Mistakes can be expensive if you're ever audited.... Re: Capital gains tax 7Jun 07, 2010 4:46 pm kek Go read the ATO's website for all the info - far better than "asking the internet". From http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm: Thanks for the link. Oddly enough about 2 hours before I posted here I was rummaging around the ATO website looking for this very thing. I was also looking for info in FBT too. Some things on the ATO site are dead easy to find, others not so easy. Re: Capital gains tax 8Jun 11, 2010 9:42 am One point to remember if you have a choice is that the date the contract of sale is dated is the date that ATO use for Capital Gains - NOT the settlement date, which many people think. So if you sell a property and the contract is dated the 29th June 2010 then the capital gains tax (if any) is due with the tax financial year of 2009 / 2010 - meaning you pay it after you lodge your tax return for this financial year just coming up to finish. If you date the contract the 1st July 2010, then any capital gains is not due until the next financial year (2011). So you can put aside any funds that you are due to pay and earn money on them or you can pay your mortgage down and earn less interest for the next year and a bit, or whatever result is best for you (seek advice on this). Re: Capital gains tax 9Jun 11, 2010 10:12 am this is very useful info. cheers VICTORY 1800, EN-SUITE, DOUBLE GARAGE, FAMILY ROOM AND ALFRESCO Land Settled: 20 July 2010 Site Scrap: 30 August 2010 Slab Pour: 20 September 2010 Frame Complete: 23 September 2010 Fascia and Gutters: 28 September 2010 Roof Complete: 06 October 2010 Lock-up complete: 28 October 2010 Plaster complete: 29 October 2010 Fix-out complete: 22 Nov 2010 PCI 7 FEBRUARY 2011 Re: Capital gains tax 10Jun 11, 2010 11:27 am AJW kek Go read the ATO's website for all the info - far better than "asking the internet". From http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm: Thanks for the link. Oddly enough about 2 hours before I posted here I was rummaging around the ATO website looking for this very thing. I was also looking for info in FBT too. Some things on the ATO site are dead easy to find, others not so easy. It's a pretty good website overall, but you do need to know the right terms for some things to get the search results you need. Did you find what you needed on FBT? It's not my area of expertise, but I can usually find my way around the site. Re: Capital gains tax 12Jun 27, 2010 2:39 pm Hi, My brother and i purchased an investment property about 2.5 years ago and has been rented out the whole time. We have now decided to renovate and sell to make a nice profit, meaning we will be hit with CGT tax. To avoid CGT or to pay minimal, when the tenants move out which is in a couple of weeks, can i get a market evaulation from a real estate agent and therefore the cost base is obviously what we paid for it and the sale price will be the market evaluation. We are going to renovate and live in it and make it our primary place of residence and sell in about 2 yrs. To avoid such a heavty CG tax is it possible to use the market evalution as our disposal price??? If not what could be a strategy to pay minimal CG other than holding it for a longer period of time??? Thanks you. Re: Capital gains tax 13Jun 27, 2010 4:42 pm You are complicating the issues... If you live in it after the rental period then, it IS your PPR (principle place of residence) Sale of a PPR is not a trigger for CGT. I am sure if this is not correct I will go to gaol Hmm not bad, 3 square meals a day and a roof over my head... Helyn I figure will have some more details for us.. or another H1 member. Where you are coming from is where you are going to... Re: Capital gains tax 14Jun 27, 2010 5:27 pm If you live in it after the rental period then, it IS your PPR (principle place of residence) Sale of a PPR is not a trigger for CGT. [quote="onc_artisan"]You are complicating the issues... It has not been a principle place of residence for the whole time of ownership therefore i think it does trigger CG and it would have to be apportioned based on rented out time over the whole time of ownership. Therefore my question when we renovate it will add a lot of value to the house and CG will have to be apportioned over the time it has been rented out. To keep CG to a minimal i was thinking you could get an evalution and that would be the sale price as the renovation will add at least 150k to the selling price. Re: Capital gains tax 15Jun 27, 2010 5:34 pm kek AJW I have a question on a similar vane. Brought my house in 2000, lived in it until 2007 at which point I moved O/S on a 4 year contract so rented it out. Will return in early 2011 however the missus is talking about up sizing. In this case do we get hit with capital gains tax? If so is it based on the purchase price in 2000 or some calculated value circa 2007? Also are there any special provisions for situations where we were renting out what would have otherwise been our primary property? There is an exemption - you can live elsewhere for up to six years, then as long as you move back in, you won't cop GCT when you later sell. If you don't move back in before you sell, the exemption won't apply. Go read the ATO's website for all the info - far better than "asking the internet". From http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm: Quote: If you use the dwelling to produce income – for example, you rent it out or it is available for rent – you can choose to treat it as your main residence for up to six years after you cease living in it. If you're still unsure, ring the ATO and ask them - they can give you free advice plus send you whatever publications there are on the subject. Or you can pay for advice from a registered tax agent. Mistakes can be expensive if you're ever audited.... Where you are coming from is where you are going to... Re: Capital gains tax 16Jun 27, 2010 5:44 pm You picked up a good point about the exemption, Onc, except that you must have lived there in the first place, immediately after you purchased the property (or as soon as practicable - e.g. if it required work to make it habitable). julz05, you can probably add on the renovation expenses, to increase your cost base, but there is no way you can get out of paying some CGT on any profit you make. There is info about valuations and when they apply on the ATO's website. I'll see what I can find.... Re: Capital gains tax 17Jun 27, 2010 5:51 pm Oh dear ....back to pushing mud Where you are coming from is where you are going to... Re: Capital gains tax 18Jun 27, 2010 6:01 pm Onc, if I ever have a concrete question, I'll come and ask you. Tax or accounting ....maybe not. I'm pretty good on bookkeeping and basic income tax, and I'm a whiz on GST, but I still pay a tax agent to do my return every year. I sold shares this year and there's no way I'm even trying to calculate the capital gain on those! I didn't find a definitive answer, but there are free ATO seminars for rental property owners coming up in the next few months if you don't want to pay for advice.... I'm sure you can ask questions.... http://www.ato.gov.au/individuals/content.asp?doc=/content/00154616.htm&pc=001/002/002/013/003&mnu=&mfp=&st=&cy=1 Re: Capital gains tax 19Jun 28, 2010 1:22 am I'm not even going to attempt to wade into the debate of CGT, but will say this: Don't confuse a sales rep/real estate agent with a Licensed Valuer. It is made very clear in real estate training and codes of conduct (in WA at least) that you must not claim to be giving a valuation. Real estate agents give market opinions/appraisals based on comparable properties, which banks and the ATO don't necessarily take a lot of notice of, hence banks sending independent licensed valuers before giving you a mortgage. Just for the record, same goes for finance and insurance. They're regulated and licensed industries. Oceanic with Nautilus upgrades. Handover 8 September 2010 Re: Capital gains tax 20Jun 28, 2010 2:15 am in my language I would say "ndaita mutete" meaning this issue is too big for me. It's interesting though. VICTORY 1800, EN-SUITE, DOUBLE GARAGE, FAMILY ROOM AND ALFRESCO Land Settled: 20 July 2010 Site Scrap: 30 August 2010 Slab Pour: 20 September 2010 Frame Complete: 23 September 2010 Fascia and Gutters: 28 September 2010 Roof Complete: 06 October 2010 Lock-up complete: 28 October 2010 Plaster complete: 29 October 2010 Fix-out complete: 22 Nov 2010 PCI 7 FEBRUARY 2011 the exemption applies only to your principal place of residence - so you must live in it. The 200 days is continuous. You also have to apply for the exemption. 2 11128 If it's your primary residence then there is no tax deductions to be made. 4 101618 |