Question: Is this legal? would it work? (Reduce Cap Gains Tax)

[fullylucky]

Just wondering has anyone ever tried to offer partial cash to buy a house as an offer?

eg. offer 400k + 50k in cash. so the seller doesn't have to pay as much capital gains tax?

Offering 450k is better than offering 480k. But for the seller they might get more if you offered them cash since most of their profit (capital gains) will be taxed at their doctor marginal tax rate 45%.

Is this considered tax evasion/aversion? Is it common? Is this clever?

I'm not really sure how capital gains tax is calculated, I just know you can deduct stamp duty. eg. you buy a house in 2000 for $300k with $10k on stamp duty then sell it in 2005 for $350k, your profit is 350k - 10 - 300 = $40k. Is that $40k then added to your financial year income? and taxed at the marginal rate? or is it profit x some fixed percentage?

 

[Aaron_C]

Aside from the tax evasion side of things (for stamp duty) - this will impact on you (the buyer's) on capital gain as your cost base is now only $400,000 rather than $450,000 - so YOU pay more tax when/if you sell your property next time. I know people who did this last time but forgot to consider this very important point.

 

[Rolf Latham]

the OSR of the state may also have something to say.

ta
rolf

 

[Terry_w]

Not only is it fraud it is potentially money laundering.

You won't find a solicitor willing to participate either (except in Bankstown area)

Stamp duty, loans, CGT will all be affected.

How are you going to hand over the cash? At settlement? What colour paper bag?

 

[Rolf Latham]

What colour paper bag?

Brown Hemp

ta
rolf

 

[nathank]

Brown Hemp

ta
rolf

we need a like / lol button in the forum...

 

[Terry_w]

Many years ago a broker asked a client for proof of funds to complete a purchase. This was a requirement from the bank. The client brought in photocopies of cash laid out over the photocopier page. About $50k according to the story I heard (probably $10k, but things get inflated as stories are passed around!)

 

[devank]

Another issue is that you are setting that property at a lower amount on records.

 

[fullylucky]

Aside from the tax evasion side of things (for stamp duty) - this will impact on you (the buyer's) on capital gain as your cost base is now only $400,000 rather than $450,000 - so YOU pay more tax when/if you sell your property next time. I know people who did this last time but forgot to consider this very important point.

That's a good point! It would only be good to do it if the buyer plans to never sell it or just make money off the rent and not capital gains.

 

[alexlee]

That's a good point! It would only be good to do it if the buyer plans to never sell it or just make money off the rent and not capital gains.

Did the part about fraud catch your attention at all?

 

[sanj]

Did the part about fraud catch your attention at all?

minor detail mate.

what's a criminal record or 2 amongst "like-minded investors"?

 

[fullylucky]

Another issue is that you are setting that property at a lower amount on records.

That's a good point as well... but I guess the only people that can see the records would be real estate agents that have access to rpdata? and not the next buyer? Not much impact on the seller?

 

[dan c]

That's a good point as well... but I guess the only people that can see the records would be real estate agents that have access to rpdata?

And our friends at the Tax Office...