Is this how you work out the CGT you pay?

[jennyn]

I just wanted to check I understand how to work out how much CGT I have to pay if I sell my IP.

If I sell IP for $200k and my expenses are:

mortgage 69,000
selling fees 10,000
legals 2,000

total: 81,000.

200,000-81,000 = 119,000.

I've had it for 3 years so I get the 50% off thingy.

So is it 50% of 119,000 = 59,500?

Then do you tax the $59,500 at your normal tax rate?

So I'm on 33% tax rate so would it be 33% x $59,500 = $19,635?

Are my sums right? Would I be paying $19,635 CGT?

I've left out the exit tax in my sums as I posted about that earlier and a reply I received was it's counted as part of the cost base so it seems to me you're paying it but then it's not included in CGT calcs because it's part of cost base.

The sums are rough above but I would just like to know if they're correct.

Thanks

Jenny

 

[House_Keeper]

The mortgage doesn't matter for calculating CGT.

What matters is the cost base, ie what you paid for it plus your purchasing costs (stamp duty and solicitor).

 

[House_Keeper]

Also, there might be an issue with building allowance claimed (depreciation) that needs to be added back and effectively increases your capital gain.

Cheers,

 

[buzzlightyear]

Taxable Income + capital gains - capital losses (inclusing previous years losses brought forward) - CGT discount = Total Taxable Income. At this point you pay tax based on this income...

Example
Income = $50,000
Nat Capital Gain = $25,000
Assuming eligible for CGT Discount = 50% of 25,000 = $12,500

Taxable Income = $50,000 +25,000 - 12,500 = 62,500

 

[Mry]

I just wanted to check I understand how to work out how much CGT I have to pay if I sell my IP.

..snip..

Housekeeper is correct in both posts. And exit stamp duty is added to the cost base.

As a quick guide, there are 3 basic things you need from the purchase date (legals, stamp duty and the cost of the property) and 3 things from the sale date (agent's commission, legal costs and actual selling price) as a starter for working out CGT. Then of course is exit stamp duty for NSW people and building writeoff claimback for houses bought after 13 May 1997, which might be you unless the house is too old....urgh, brain hurts..

So we have
Legals on purchase - unknown
stamp duty - unknown
purchase price of property - unknown
agent's commission - $10,000 (shouldn't it be $5450?)
legal fees on sale - $2,000 (my advice - get a cheaper lawyer)
sale price - $200,000
NSW exit stamp duty - unknown

Could you fill in the blanks?

And the tax you pay also depends on your taxable income before you add on the CGT. If you want an accurate tax payable, you need to give us a ball park figure on your taxable income before CGT. Oh, and any special building writeoff you may have claimed.

btw, there is no 33% tax rate. The closest you can get is 31.5% (30% + 1.5% medicare levy).

 

[Les]

G'day all,

What about any Capital costs that might have been accrued over that time? I would hope there would relief for those....

e.g. build new carport - raises value of property (i.e. more CGT owing). We should be able to claim back costs associated, surely.

Regards,

 

[depreciator]

Hi Les,
This is really accountant territory - we do depreciation.
But yes, it's my understanding that the undeducted portion of any capital improvements (like a carport) carried out during the period when the property was rented out would be added to the cost base.
I don't think this applies if the work was done when the property was a PPOR and the property was later rented out if the date of first rental was after August 1996.
Let's say somebody lived in a property and renovated it while they were living there. Then in 1997 they moved out and rented the property out. The cost of the improvements carried out prior to them renting the place out are not added to the cost base. BUT, the cost base they now use is the value (determined by a valuer) of the property when they rent it out. So the improvements are factored into the cost base. Does that make sense?
It's a good idea if you decide to turn your home into a rental property, to get a valuer to value it when you do this even if you have not made any substantial improvements to the property.
The above is straying beyond my area of expertise, so feel free to set me straight - in this post I'm just another property investor trying to make sense of something.
Scott