Penalties for deferring CGT.

Does anyone have any experience or knowledge of deferring cgt and what are the penalties? Someone mentioned 15% to me. Also after what date does this penalty interest start accruing?

Eg property went to contract and sold in 2011 tax year, is the cgt due in feb 2012? Will penalty interest start accruing from Mar 1?
 
You have to declare a capital gain (or loss) in the income tax year in which the contract to sell is SIGNED. (Beware of selling in May/June, it may be better to defer signing until 1st July).

The only way you can delay paying the tax is to time the selling:

e.g., we sold a (residential) property on 1st July 2007. Gain was declared in the income tax return for the 2007/08 year. We saw our accountant in September 08 and as accountants have until May in the following year to lodge returns we arranged for our return to be lodged in late May 09. We had to pay the tax in July 09, which basically delayed payment for nearly 2 years.

I believe the "rules" are different for businesses.
Marg
 
Assuming contracts executed the tax becomes due after you lodge tax returns and receive the notice of assessment from the ATO. Tax returns would be due by around Oct of that year. I think if you are using an accountant it may be Feb. But once the notice of assessment arrives you can then negotiate with the ATO and ask for extensions to pay or to pay by installments - everyone should do this as it is usually granted and you can keep money in your offset account longer. It doesn't cost anything to ask - just ring them up and they can usually grant it over the phone.
 
Another consideration is when a contract is signed at the end of a financial year and settlement occurs some time after triggering the CGT event. You might submit your tax return and then after settlement submit an amendment.
http://www.ato.gov.au/corporate/content.aspx?menuid=0&doc=/content/00208572.htm&page=21&H21

In the case of the sale or other disposal of real estate, the time of the event is:

* when you enter into the contract (generally the date on the contract), not when you settle - the fact that a contract is subject to a condition, such as finance approval, generally does not affect this date
* when the change of ownership occurs if there is no contract, or if the real estate is compulsorily acquired - the earliest of:
when you received compensation from the acquiring entity
when the entity became the property's owner
when the entity entered the property under a power of compulsory acquisition, or
when the entity took possession of the property under that power.

Although you must include your capital gain or capital loss in the income year in which the contract was made, you are not required to do this until settlement occurs. If settlement occurs after you have lodged your tax return and been assessed for the relevant income year, you will have to request an amendment.

A liability for shortfall interest charge (SIC) can arise due to an amended assessment for a capital gain. We generally remit it in full if the request for amendment is lodged within a reasonable time after settlement (considered to be one month in most cases). However, remission is not automatic, you must request it and we consider each request on a case-by-case basis. If you consider that the SIC should be remitted, you should provide your reasons when you request the amendment to your assessment.
 
You have to declare a capital gain (or loss) in the income tax year in which the contract to sell is SIGNED. (Beware of selling in May/June, it may be better to defer signing until 1st July).

This is what we did, lesson learnt for next time! Thanks Marg.
 
Assuming contracts executed the tax becomes due after you lodge tax returns and receive the notice of assessment from the ATO. Tax returns would be due by around Oct of that year. I think if you are using an accountant it may be Feb. But once the notice of assessment arrives you can then negotiate with the ATO and ask for extensions to pay or to pay by installments - everyone should do this as it is usually granted and you can keep money in your offset account longer. It doesn't cost anything to ask - just ring them up and they can usually grant it over the phone.

Good advice thanks Terry - I will ring them this week. I didn't know that they usually grant extensions just by asking. I thought you had to have a reason. Yes leaving in offsett is a good thing once clarified with ATO. I am hoping it is feb and will clarify this week too.
 
Another consideration is when a contract is signed at the end of a financial year and settlement occurs some time after triggering the CGT event. You might submit your tax return and then after settlement submit an amendment.
http://www.ato.gov.au/corporate/content.aspx?menuid=0&doc=/content/00208572.htm&page=21&H21

In the case of the sale or other disposal of real estate, the time of the event is:

* when you enter into the contract (generally the date on the contract), not when you settle - the fact that a contract is subject to a condition, such as finance approval, generally does not affect this date
* when the change of ownership occurs if there is no contract, or if the real estate is compulsorily acquired - the earliest of:
when you received compensation from the acquiring entity
when the entity became the property's owner
when the entity entered the property under a power of compulsory acquisition, or
when the entity took possession of the property under that power.

Although you must include your capital gain or capital loss in the income year in which the contract was made, you are not required to do this until settlement occurs. If settlement occurs after you have lodged your tax return and been assessed for the relevant income year, you will have to request an amendment.

A liability for shortfall interest charge (SIC) can arise due to an amended assessment for a capital gain. We generally remit it in full if the request for amendment is lodged within a reasonable time after settlement (considered to be one month in most cases). However, remission is not automatic, you must request it and we consider each request on a case-by-case basis. If you consider that the SIC should be remitted, you should provide your reasons when you request the amendment to your assessment.

Thanks Crabnet - some things I had never really considered - good to know for the future.
 
Good advice thanks Terry - I will ring them this week. I didn't know that they usually grant extensions just by asking. I thought you had to have a reason. Yes leaving in offsett is a good thing once clarified with ATO. I am hoping it is feb and will clarify this week too.

You might need a bit of a reason - collecting funds, cashflow tight, just getting a new job etc.
 
Holy cow batman... 95% !!!!!!

By the way to get a payment plan / extension do you have to prove stress or can you request this without detail (eg. as you might be asset rich bulk cash poor?)

Do they charge interest ?
 
late lodgement

You have to declare a capital gain (or loss) in the income tax year in which the contract to sell is SIGNED. (Beware of selling in May/June, it may be better to defer signing until 1st July).

The only way you can delay paying the tax is to time the selling:

e.g., we sold a (residential) property on 1st July 2007. Gain was declared in the income tax return for the 2007/08 year. We saw our accountant in September 08 and as accountants have until May in the following year to lodge returns we arranged for our return to be lodged in late May 09. We had to pay the tax in July 09, which basically delayed payment for nearly 2 years.

I believe the "rules" are different for businesses.


Marg

Hi Marg

I wonder what would the reason that ATO be accepting to lodge Individual Tax Return as late as may

Could you share the light. thank you in advance

t
 
Hi Marg

I wonder what would the reason that ATO be accepting to lodge Individual Tax Return as late as may

Could you share the light. thank you in advance

t

I'm not Marg, but our tax is due by the end of April the year after the end of the tax year because our accountant requests a later lodgement every year.

Your accountant can do this for you too.
 
Penalties can be up to 95 per cent. Depends on a host of things.

Well whenever they pursue you for money owed they always slap on this penalty, that penalty, interest here and there and eventually it becomes more than 95% more of what the original debt was. It's to scare you and try and batter you into submission with the artificially inflated figure. Until, of course, the ATO figures out that the initial claim was wrong and they remit the penalties....bunch of idiots.
 
That link is for choices available under the CGT regime. It is not applicable where a choice cannot be made. i.e. sale of a property not eligible for the small business concessions.

As usual the internet is full of information which unless interpreted properly is totally and utterly useless.
 
That link is for choices available under the CGT regime. It is not applicable where a choice cannot be made. i.e. sale of a property not eligible for the small business concessions.

Very sorry - my mistake; the supplied link does not apply to Tin Tin in this case.

It is valid for 'Individuals' needing to make choice regarding PPOR & IP 6yr Rule, so not specifically for property eligible for small business concessions only.


As usual the internet is full of information which unless interpreted properly is totally and utterly useless.

I deserve that snide retort; I dish it out so fair enough......touche.

Ian
 
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