CGT Event --- Confused !!!

[Emily_Zac]

Hoping someone can help !!!

On my 1st IP when 1st purchased I did the following :-

Bought 06 - $410,000
Deposit - $82,000

loan - $328,000 100% deductable interest


then on bad broker advice we re-financed for a much better rate and to release the deposit

paid into out personal account $63,000
loan expenses (roll into loan) $17,500

loan - $408500 of which I have only claimed 80% of the interest in my returns


Now due to GFC I have had to sell this IP and I am having difficulty working out the capital gain / loss on this loan part of it

Can anyone help , I won't confuse anyone with what I think but would like others take on this

 

[jrc]

Capital gain is based on:

Capital gain = selling price less selling costs (eg agents, legals) less purchase price less purchase costs (eg stamp duty (unless in ACT), legals)

The loans and their application is irrelevant for CGT.

Loan expenses (or the proportion applicable to the investment purpose of the loan) would normally be claimed over 5 years (or the term of the loan if shorter) provided that if the loan is repaid earlier you would claim the balance of the unclaimed amount in that year's tax return.

Assuming you refinanced your loan completely on your figures I would be claiming 83.7803% of the refinanced loan and of the loan expenses.

If a proportion of the loan expenses relates to break fees/deferred establishment etc on your initial loan then that part should have been claimed in that year's tax return and the percentage claimable would increase above 83%.

I see from some of your earlier posts that you do your own tax. I would recommend you get a taxation accountant to do your return this year and review your past returns. You are in complex areas and you are not doing yourself or your family any favours by trying to wing it.

 

[Emily_Zac]

Capital gain is based on:

Capital gain = selling price less selling costs (eg agents, legals) less purchase price less purchase costs (eg stamp duty (unless in ACT), legals)

The loans and their application is irrelevant for CGT.

Loan expenses (or the proportion applicable to the investment purpose of the loan) would normally be claimed over 5 years (or the term of the loan if shorter) provided that if the loan is repaid earlier you would claim the balance of the unclaimed amount in that year's tax return.

Assuming you refinanced your loan completely on your figures I would be claiming 83.7803% of the refinanced loan and of the loan expenses.

If a proportion of the loan expenses relates to break fees/deferred establishment etc on your initial loan then that part should have been claimed in that year's tax return and the percentage claimable would increase above 83%.

I see from some of your earlier posts that you do your own tax. I would recommend you get a taxation accountant to do your return this year and review your past returns. You are in complex areas and you are not doing yourself or your family any favours by trying to wing it.

Thanks for your reply ... I will think about getting an accountant.

Do you know if I am still able to claim the remainder of my deposit

Deposit $82k
redrew $63

can I still claim the remaing as a purchase cost ?

Thanks

 

[JamesGG]

Do you know if I am still able to claim the remainder of my deposit

These amounts would already be included in the purchase price of the property, no?

In addition to jrc's comments above, you'll also need to add back any capital works deductions that you might have claimed.

Mry is an accountant who works somewhere around your end of the woods. I'd suggest that his costs would be well worthwhile; not just for getting the CGT thing right, but also for finding additional ways of minimising the overall tax for the year...

 

[Ski-bum]

hi emily_zac,

I'm pretty sure a deposit doesn't count as a purchase cost, therefore no you won't be able to add it to the cost base.

Have you sold the property yet? If you post some figures up, ppl can give you an estimate or show how to work it out. BUT sounds like you really need an accountant as you are really confusing yourself!

 

[Bargain Hunter]

I'm pretty sure a deposit doesn't count as a purchase cost, therefore no you won't be able to add it to the cost base.

The deposit is part of the cost base. If you buy a $100k property, pay 10% deposit, and the remaining $90k at settlement you have bought a $100k property.

If you renovate and spend $20k this also goes into the cost base, now $120k.

You sell at $200, you deduct the cost of the house $100k, the cost of the reno $20k, leaves $80 Capital Gain less other costs as per jrc's response, for this exercise lets say $72k.

As you have owned the property for more than twelve months you will have to pay CGT on half the estimated CG so tax will be applicable on $36k.

The $36k is added to your taxable income to determine the tax rate that applies.

This is the mechanics of it, go to an accountant to see how it applies to you personally.

Regards

Andrew

 

[Mry]

So far the only figure I see relevant to the capital gains question is the cost base of $410,000.

 

[Emily_Zac]

The deposit is part of the cost base. If you buy a $100k property, pay 10% deposit, and the remaining $90k at settlement you have bought a $100k property.

If you renovate and spend $20k this also goes into the cost base, now $120k.

You sell at $200, you deduct the cost of the house $100k, the cost of the reno $20k, leaves $80 Capital Gain less other costs as per jrc's response, for this exercise lets say $72k.

As you have owned the property for more than twelve months you will have to pay CGT on half the estimated CG so tax will be applicable on $36k.

The $36k is added to your taxable income to determine the tax rate that applies.

This is the mechanics of it, go to an accountant to see how it applies to you personally.

Regards

Andrew

Andrew

thanks for this now makes perfect sense

Thanks again
Martin

 

[Emily_Zac]

So far the only figure I see relevant to the capital gains question is the cost base of $410,000.

Thanks

I can see that now ,I was over complicting ( again !)

Martin

 

[Ski-bum]

The deposit is part of the cost base. If you buy a $100k property, pay 10% deposit, and the remaining $90k at settlement you have bought a $100k property.

ahh yes you are right. whoops, seems like the confusion was rubbing off on me!