Capital Gains & Centrelink

G'day

I am about to sell a IP and unsure of how CGT works, below is how I think it works (made up numbers is the theory right)

BUY $100000
SELL $110000
CAPITAL COST $8000
GAIN $2000
BOUGHT 01.01.09
50% DISCOUNT $1000 ( I KEEP NO TAX?)
MY RATE OF TAX 15% WHICH i PAY ON THE REMAINING $1000

-------------------------------------------------------

With Centrelink I understand that if I have a $20,000 loss that this is rental income minus rental deductions that this is converted to income for centrelink purpose ( so I would show on paper an extra $20k income)

What happens if I have a CG event and come out with a 20k loss , does that get converted to income for centrelink purpose.

any comments or advice welcomed

Thanks
 
Hi, yes, you appear to have the idea of CGT worked out. Well done. Note also that if you claimed depreciation on the capital works (such as the building or renovations) while holding the property, then you would also have to add this amount back in the CGT calculation.

Centrelink add back investment losses to your taxable income. Say you started with taxable income of $50,000. You lose $20,000 from negative gearing; taxable income is now $30,000 and this is the level that you pay tax. However Centrelink will add back the $20,000 in negative gearing and consider your income to still be at the same $50,000 that you started with.

Capital losses won't reduce your taxable income, so Centrelink don't need to add them back.
 
I'd bet anything if you rang centerlink they wouldn't know what they would do in this situation - they really can't handle investments well. I never did get them to answer my question about how they treat offset accounts - the head of that department didn't know what an offset account was. Don't think I got that question answered here either, come to think of it ...

Centerlink were harrassing me for my settlement statement (which is raw numbers BEFORE you work out your CGT) for a while there, if they got their hands on this you'd be screwed and would spend the next year explaining about your purchasing costs needing to come out of that total.

They treat CGT (and investment assets in general, particularly business income) totally differently if you are on a pension vs allowance vs just FTA, and (very) different again to the tax department. I always have to do my financials 3 times in 3 completely different ways. Very annoying.

See an accountant who knows more than Centerlink do.
 
Hi, yes, you appear to have the idea of CGT worked out. Well done. Note also that if you claimed depreciation on the capital works (such as the building or renovations) while holding the property, then you would also have to add this amount back in the CGT calculation.

Centrelink add back investment losses to your taxable income. Say you started with taxable income of $50,000. You lose $20,000 from negative gearing; taxable income is now $30,000 and this is the level that you pay tax. However Centrelink will add back the $20,000 in negative gearing and consider your income to still be at the same $50,000 that you started with.

Capital losses won't reduce your taxable income, so Centrelink don't need to add them back.

Thank you for your help
 
I'd bet anything if you rang centerlink they wouldn't know what they would do in this situation - they really can't handle investments well. I never did get them to answer my question about how they treat offset accounts - the head of that department didn't know what an offset account was. Don't think I got that question answered here either, come to think of it ...

Centerlink were harrassing me for my settlement statement (which is raw numbers BEFORE you work out your CGT) for a while there, if they got their hands on this you'd be screwed and would spend the next year explaining about your purchasing costs needing to come out of that total.

They treat CGT (and investment assets in general, particularly business income) totally differently if you are on a pension vs allowance vs just FTA, and (very) different again to the tax department. I always have to do my financials 3 times in 3 completely different ways. Very annoying.

See an accountant who knows more than Centerlink do.

You are soooo right I rang centrelink, they did not have a clue they said anything That I was in loss over they would count as income.

Why put in rules if they have no one who can queries about the rule :rolleyes:
 
Top