CGT Rollover Relief....

[watto]

G'day All,

I have a CGT question......

Can you get the rollover relief when selling a trust asset and using the funds to finance a new company devoloping units?

The trust asset is a number of strata tittled residential units. The basic advice i have so far is that this type of asset is considered a passive one and to be eligible for rollover relief it needs to be an active asset.

If anyone can shed some light on the above i would be grateful.

Cheers
watto

 

[DaleGG]

Hi Watto

I'm afraid that I would agree with the advice you have had thus far. Sorry

Dale

Originally posted by watto
G'day All,

I have a CGT question......

Can you get the rollover relief when selling a trust asset and using the funds to finance a new company devoloping units?

The trust asset is a number of strata tittled residential units. The basic advice i have so far is that this type of asset is considered a passive one and to be eligible for rollover relief it needs to be an active asset.

If anyone can shed some light on the above i would be grateful.

Cheers
watto

 

[watto]

Thanks Dale....

Ok now its time to think outside the square ask not if it can be done but how can it be done....

there must be some creative answer....


If the desc/trust holding the asset was to dispose of said asset, then look to loan/lease the funds to a unit trust, for a commercial devolopment project and derive an income from the interest on loaned/leased monies, would this then trigger a CGT rollover exemption?

Or do we still get back to the active/passive definition?

I'm really looking for some creative ways to solve this problem.


Cheers
watto

 

[DaleGG]

Hiya Watto

I'll think about it and see what I can come up with, but, at face value the problem remains that you are talking about 2 transactions:

the first is the sale of the asset
the second is the transfer of funds

CGT is triggered by the first only and can only be reduced if one of the exemptions allow for the CGT to be deferred or exempted by a roll over.

The roll over provisions require that the asset be an active asset for the roll over to be allowed, and, those same provisions classify property as a passive asset.

I'm doubtful that there is a legal way around this . . .

Dale

Originally posted by watto
Thanks Dale....

Ok now its time to think outside the square ask not if it can be done but how can it be done....

there must be some creative answer....


If the desc/trust holding the asset was to dispose of said asset, then look to loan/lease the funds to a unit trust, for a commercial devolopment project and derive an income from the interest on loaned/leased monies, would this then trigger a CGT rollover exemption?

Or do we still get back to the active/passive definition?

I'm really looking for some creative ways to solve this problem.


Cheers
watto

 

[wbthom]

Watto is there any way that you can obtain the funds using the trust asset as security avoiding the sale and CGT altogether?

Bill

 

[see_change]

Dale

Are there definitions of what makes an Active assett ?

See change

 

[DaleGG]

Hiya SC

Yes, it is at:

SECTION 152-40 Meaning of «active» asset


152-40(1)

A *CGT asset is an «active» asset at a given time if, at that time, you own it and:


(a) use it, or hold it ready for use, in the course of carrying on a *business; or


(b) it is an intangible asset that is inherently connected with a business that you carry on (for example, goodwill or the benefit of a restrictive covenant); or


(c) it is used, or held ready for use, in the course of carrying on a business by:

(i) your *small business CGT affiliate; or
(ii) another entity that is *connected with you.


and:

Exceptions


152-40(4)

However, the following *CGT «assets» cannot be «active» «assets»:


(a) interests in an entity that is *connected with you, other than *shares and interests covered by subsection (3);


(b) shares in companies, other than shares covered by subsection (3);


(c) interests in trusts, other than interests covered by subsection (3);


(d) financial instruments (such as loans, debentures, bonds, promissory notes, futures contracts, forward contracts, currency swap contracts and a right or option in respect of a share, security, loan or contract);


(e) an asset whose main use in the course of carrying on the *business mentioned in subsection (1) is to derive interest, an annuity, rent, royalties or foreign exchange gains unless:

(i) the asset is an intangible asset and has been substantially developed, altered or improved by you so that its market value has been substantially enhanced; or
(ii) its main use for deriving rent was only temporary.
Example:
A company uses a house purely as an investment property and rents it out. The house is not an «active» asset because the company is not using the house in the course of carrying on a business. If, on the other hand, the company ran the house as a guest house the house would be an «active asset because the company would be using it to carry on a business and not to derive rent.


I hope that this is helpful

Dale

Originally posted by see_change
Dale

Are there definitions of what makes an Active assett ?

See change

 

[bundy1964]

Originally posted by DaleGG
(i) the asset is an intangible asset and has been substantially developed, altered or improved by you so that its market value has been substantially enhanced

Hi Dale

When you cut out the legal speak doesn't that mean a reno would give it a CGT rollover exemption?

bundy

 

[DaleGG]

HIya Bundy

No, a reno is on a tangible asset and not an intabgible asset . . .

Pity!

Dale

Originally posted by bundy1964
Hi Dale

When you cut out the legal speak doesn't that mean a reno would give it a CGT rollover exemption?

bundy