Minimizing cgt

Discussion in 'Accounting and Tax' started by Scott No Mates, 16th May, 2015.

  1. Scott No Mates

    Scott No Mates ...and people wonder why?

    Joined:
    25th Jun, 2011
    Messages:
    5,391
    Media:
    144
    Location:
    Sydney - LNS
    An acquaintance has been approached by a developer to purchase his business premises which has been rezoned to high density residential.

    He had a very low entry point as he purchased over 25 yrs ago but it is a post cgt asset. Other than repairs and maintenance he has done little to the property in this time.

    I haven't clarified whether he trades from the same entity or if the business (professional services) sits outside of this.

    Can he reduce the amount of cgt payable on a development site by offsetting value of the property by accepting thae site's value in units + cash?

    Example: paid $500k 15 yrs ago. mkt value $2m
    Can you take $500k + 2 units @ $750k without incurring / minimising cgt?
     
    Last edited: 17th May, 2015
  2. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

    Joined:
    2nd Jul, 2013
    Messages:
    2,778
    Location:
    Sydney
    The CGT proceeds include ANY form. Cash, replacement assets the lot.

    Its also a serious fraud concern punishable by gaol for vendor and buyer to defraud the commonwealth of GST + Income Tax and its also a State crime to defraud the state of stamp duty.
     
  3. Rob G.

    Rob G. Member

    Joined:
    10th Apr, 2008
    Messages:
    1,151
    Location:
    Melbourne, Victoria
    If an active asset of his business or leased to an associate that uses as an active asset then the small business CGT concessions might be available.

    Depends upon a few conditions.
     
  4. Scott No Mates

    Scott No Mates ...and people wonder why?

    Joined:
    25th Jun, 2011
    Messages:
    5,391
    Media:
    144
    Location:
    Sydney - LNS
    Thanks Guys, I caught up with him today, looong lunch :D

    No intention to defraud just to minimise.

    By the sounds of it, it is a business asset though he is a sole trader, property in personal name, minimal super (though he has built up several other investments).

    Tossing up between a big cash settlement 15x what he paid - so there'll be huge CGT issues unless it qualifies as business asset and can be moved to super. Is tax payable in this situation (& at what rate - 15% contribution)?

    The alternative is to take several units - will cgt be payable in the tax year that the contract is entered into? or is it delayed to settlement tax year ie 2/3 years time?
     
  5. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

    Joined:
    2nd Jul, 2013
    Messages:
    2,778
    Location:
    Sydney
    There are far too many variables for this Q in SS. Its possible its exempt or subject to concessions under the sml business concessions as Rob indicated. All well worth exploring if its an active asset used in a small business. This must be explored early to ensure that all available concessions are satisfied.

    I just completed such a engagement for a client who met the 15year retirement concession AND age tests and he + wife each rolled a large sum to super. He originally was worried about all the tax he thought he may need to pay. He didn't pay a cent. These concessions reflect that many small businesses ARE the super for the taxpayer.
     
  6. Scott No Mates

    Scott No Mates ...and people wonder why?

    Joined:
    25th Jun, 2011
    Messages:
    5,391
    Media:
    144
    Location:
    Sydney - LNS
    These are exactly his concerns - paying more than $500k in cgt or getting a concession.