Please help. Best strategy for selling

[investor2009]

Hi all, I'm not too confident in my way of accounting skills and I'd like to get this right to maximise profits. Here's my situation:

Liquidating 2x properties for now (was looking at selling the lower priced one this tax year so I receive a good tax return, then the higher priced one next financial year to give me time to save some money to pay tax?) We will only take around $40-50k profit after fees on this lower priced one, and around $160k on the other.

In my current job I will earn around $80,000 paying tax as if I earned more so maybe $18,000 tax and I'd normally receive the majority of that back with deductions as in neg gearing, depreciation etc. My question to you is: Whats my best strategy here to maximise final profits?

I thank you

Kind regards,
Shane

 

[alexlee]

In my current job I will earn around $80,000 paying tax as if I earned more so maybe $18,000 tax

I don't know what that means. Per the ATO website, if you earn 80,000 (excluding super), then your tax payable is 17,547.

My question to you is: Whats my best strategy here to maximise final profits?

You're asking whether there is a 'better' time to sell to minimise tax payable on the CG? Then what you currently 'pay' in tax and how much of that you get back is irrelevant. The key is how much your taxable income is.

However, given you only have two sales events here, you either sell them both in the same financial year or one in this year one in the other.

Get an accountant to calc your expected capital gains. e.g. have you included depreciation you need to add back or the CG discount in your definition of 'profit'? You're using non-tax terms, and I doubt you're even using the accounting definitions, so they might be wrong. Assuming your gross gain of 160k is right, the capital gains will be 80k, and the other maybe 20k.

Either sell the one with the lower gain this year (contract by June 2014) and the higher gain one next year (contract from July 2014). There's a small chance it might be better to sell both next year (get an accountant to run the scenarios for you: the key here is paying part of the gain at the lower tax bracket this year, versus pushing the tax payable out another 12 months).

 

[investor2009]

Nice work, thanks Alex!

 

[alexlee]

Make sure you get an accountant to go through your figures before you sign anything. Those 'profits' figures of yours could be way, way off. A lot of things in your post makes me think you either did the calculation wrong, or you don't understand what the tax process is.

 

[Terry_w]

Few things to consider:
1. timing of the sale
2. claim all possible deductions
3. reduce taxable income in year of gain to try to reduce tax payable on the gain
- Sal sac into super
- prepay interest on other investment loans
- negative gearing with other property

 

[investor2009]

Thanks guys. Yes ive though avout all those things. Seems I kbow what Im doing but just would like a second opinion

 

[investor2009]

I also have just remembered that the circumstance on one of these props is a bit different

We rented it out for 11 months, got fhog and stamp concessions. Lived there for 2 years, spent $60k on improvements. Moved to new ppor and it's been rented for thr past 3 years

How's the cgt going to work on this one?

 

[marg4000]

CGT is triggered on the contract date, not the settlement date. So technically you could sign for one at the end of June and the other in July and have the event fall in two different tax years.

Selling the higher profit one in July will give you nearly two years until you actually have to hand over the tax to the ATO.

If possible, sell the higher profit one in a year of lower income.
Marg

 

[starter]

Also consider selling last the one with the higher proposect of short term growth.

Re your question in relation to the former PPOR, CGT would be calculated from the time that it was no longer your PPOR.

 

[tobe]

I also have just remembered that the circumstance on one of these props is a bit different

We rented it out for 11 months, got fhog and stamp concessions. Lived there for 2 years, spent $60k on improvements. Moved to new ppor and it's been rented for thr past 3 years

How's the cgt going to work on this one?

Get some advice from your accountant, but it may be CGT free if you choose to have your PPOR exemption apply.

 

[Terry_w]

I also have just remembered that the circumstance on one of these props is a bit different

We rented it out for 11 months, got fhog and stamp concessions. Lived there for 2 years, spent $60k on improvements. Moved to new ppor and it's been rented for thr past 3 years

How's the cgt going to work on this one?

Sounds like you rented it out first? If so, never CGT free, but would be apportioned up till you lived in it and the valuation on moving out.

 

[investor2009]

Thanks guys

I still have a letter of val from a friendly rea who did it on letterhead for us when we moved in. He wrote the appraisal val just $10k more than purchase price for when we sell. Does this mean were taxed on $10k, then also x amount from when we moved out? Approximately how much would we be taxed on?

Its moved up approx $50k since moving out but all up substantially more