CGT advice required

[The Porky]

Hi everyone

I was wondering if anyone maybe able to provide me with CGT advice and what we be subject to pay.

Here is a brief description of our situation:

a. Purchased our house in March 2001 and payed $250k plus stamp duty of approx 15K. (ie; total = 265K).

b. We had intentions of moving into the house straight away but because of work commitments we had to move to Sydney indefinitely.

c. The house was then let as an investment property from March 2001.

d. In March 2007 my family and I moved back from Sydney (ie. house vacated by the tenants) and it became our place of residence- where we have remained.

e. We then had the property re-valued (ie. in March 2007) as we were considering a renovation and wanted to ensure that we didn’t over capitalise.

That valuation came in at $530K.

f. In March 2007-September 2007 we renovated the property spending 180K.

g. We are now considering selling the property (ie. for arguments sake potentially in March 2014) and were advised in the “current market” that we should get in the vicinity of 850K.

So would one go about calculating the capital gain that would be applicable based on the details above?

If it could be articulated in the way that I could follow based on the numbers and time frames detailed above I would really appreciate it.

Cheers

 

[coastymike]

Few things required

1. What is the proposed allocation of the 850 between depreciating plant and equipment and other.
2. What is the written down value of the plant and equipment on sale.
3. What was the value of the divison 43 capital allowances claimed during the period of investment.
4. What are the proposed agents and other selling expenses.

 

[The Porky]

Hi thanks for the reply.

I don't have this sort of information at hand at the moment.

However was just hoping to roughly workout how much we would be required to pay (ie.to give us an rough idea)

Therefore just trying to understand how I use the information I have detailed above to work out the potential capital gain we would need to pay

 

[coastymike]

unfortunately the answers to those questions might change the answer dramatically. could be tens of thousands dollars difference in tax estimates with that info.

 

[The Porky]

unfortunately the answers to those questions might change the answer dramatically. could be tens of thousands dollars difference in tax estimates with that info.

Thanks again for the reply.

Appreciate that I may require additional information.

However are you able to give me an idea as to how I would work out the capital gain based on the information I detailed within my original post.

Just after a rough idea at this stage

Thanks

 

[GaryT]

In very simplistic terms Capital Gain = Sale Price - Cost price - improvements, apportioned for time as IP. So 850-250-15-180 x 6/13.

Valuation is irrelevant.

The result is allocated to the owner(s) and 50% is added to their taxable income.

 

[VaSSagO]

Why is valuation irrelevant?

Only pay CGT whilst it was not a PPOR so on the gain $530k - $265k = $265k

Then get a 50% discount, so $132.5k taxable (less associated costs, add back depreciation)

Thats what I would of thought

 

[vaughan]

In very simplistic terms Capital Gain = Sale Price - Cost price - improvements, apportioned for time as IP. So 850-250-15-180 x 6/13.

Valuation is irrelevant.

The result is allocated to the owner(s) and 50% is added to their taxable income.

Don't forget to add depreciation amounts back into the calculation:


Capital Gain = Sale Price + Depreciation - ( Cost price - Improvements )

 

[jrc]

Why is valuation irrelevant?

Only pay CGT whilst it was not a PPOR so on the gain $530k - $265k = $265k

Then get a 50% discount, so $132.5k taxable (less associated costs, add back depreciation)

Thats what I would of thought

Valuation is irrelevant because the legislation only provides for the cost base to be reset on a PPOR if you moved into it immediately after settlement, not where the property was rented out after settlement and before you moved into it

 

[Rob G.]

b. We had intentions of moving into the house straight away but because of work commitments we had to move to Sydney indefinitely.

Sounds like never was a main residence.

Cheers,

Rob

 

[GaryT]

Don't forget to add depreciation amounts back into the calculation:


Capital Gain = Sale Price + Depreciation - ( Cost price - Improvements )

OK I did say that my calculation was very simplistic which I thought was what The Porky was after. But to get more technical and to correct an obvious mistake in the above calc:

Capital Gain = Sale Price + Building write off claimed during rental period (if purchased after 13/5/1997) - WDV of fixtures & fittings on sale (assumed sold at WDV and therefore no tax effect) - (Cost price including acquisition costs + Improvements + Holding costs not claimed as a tax deduction for period of PPOR (Interest, rates, maintenance, etc if purchased after 20/8/91) - Value of initial fixtures & fittings (amount to be depreciated on initial rental) + Value of fixtures and fittings added to depreciation schedule after initial rental) (Note brackets)

and then apportioned for period when not PPOR.

 

[The Porky]

Cheers thanks for the information I really appreciate it.