Quick capital gain calculation for those less maths challenged than me

If an IP is sold for $300K and the cost base associated with the house is $100K, and it has been held for more than twelve months, how is the tax worked out?

eg. $300K sale proceeds, less cost base of $100K to be paid off the loan, leaving $200K to be divided by two = $100K added to the income of the owner in the year it is sold....


eg. $300K divided by two = $150K gain to be added to the income, regardless of whether the $100K cost base amount is paid off the loan.

I am getting confused :confused:. The more I try to think about it, the hard it gets.

I know I am getting confused because the $100K cost base can be paid off the loan, or not, and it really doesn't have anything to do with the loan. It all comes down to when the cost base is deducted (I think).
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Maybe it's back to school for us both!
I'd have thought the C.G.tax is payable on PROFIT-$200k in your scenario
Held for more than one year = discount 50% therefore taxed on $100k which will be added to income in the year of sale.
Regardless of whether your borrowings are outstanding or not....
Then again I too am now clearly uncertain so I will await the answer of someone far more learned than I on this one!
Your loan amount is irrelevant

Hey wylie,

It's the profit that is halved (discounted by 50 % if > 12/12) before it is taxed.

Profit is sale price (less sales and advertising expenses) minus cost base (purchase price and all closing costs including but not limited to stamp duty, solicitors fees, any travel costs such as airfares, accom associated with purchase, etc. etc)

Your outstanding loan or lack thereof is not important to the calculation of the taxable profit as silversands has pointed out.

Go and dig out your files and get the cost base up as high as possible.

Don't forget any depreciation you may have claimed during your investment period will affect your figures in the ATO's favour (check with your accountant).
As said, in the example you gave $100K is added to the income of the owner for the tax year in which the contract is signed.

But remember it is now March, so consider carefully whether you want the income added to this financial year. It may pay you to hold off until 1st July, in which case the gain is taxed in the 2010/2011 financial year. If lodged through an accountant at the latest time possible (May 2012), you will not have to pay the tax until May/June 2012, which gives you an interest free loan of the tax amount for nearly 2 years.
Thanks everyone. I was getting more confused the more I tried to pin down an answer.

Marg, your advice (as always :)) is spot on. We are looking at a few options right now, one of which is to sell a half share IP. We are speaking to a planner from our super fund on the phone Tuesday and will follow that with a face to face appointment.

Once I have a few answers regarding our superannuation position, we will see our accountant. We are thinking that we will wait until after July 1 if we do sell.

I just need to pin down hubby to see if he wants to go back to work or not, as everything hinges on whether we will have any PAYG income after June :eek:.