Selling before 1st July

From: Aaron Dwyer

I have a friend who is holding off selling his IP on advice from his accountant that if he signs the contract now CGT is due this year even if settlement is after 1st July.

Is this correct?? I thought it was determined when you get hold of the money not when you simply sign the contract.

Aaron Dwyer
~ To know and not to do, is really not to know at all.
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Reply: 1
From: Steve Navra

Hi Aaron,

As far as I know, CGT is levied from when the sale is deemed to have occurred. There has always been some lassitude granted as to when the 'deeming' is viewed as having happened. However, perhaps Dale Guth can comment further about this.

The real issues are the following:

1) Is the accountant qualified to give such advice?

2) What happens if the sale price increases?

Then there would be a greater amount of tax to be paid. Yes, it would be deferred to the end of the following tax year, but would this offset the difference in interest on the mount?

Say the extra CGT amount was an extra $20,000 and the total CGT amount deferred was $200,000 at 7% (Interest on the money over 1 year) Then the extra $20,000 levied would be greater than the $14,000 interest saved. Therefore bad advice to hold off.

3) What happens if the price drops?

Likewise the amount of CGT would decrease proportionately and once again lets say this was $20,000. Would the interest saved by deferring into the next tax year be greater than this amount?

Some times, it is best to act on the current present reality, at least this way you know exactly what you are in for. the other options are at best speculative.


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Reply: 1.1
From: Sim' Hampel

I'll apologise in advance for my comments now, Steve, but it amused me when I read your post and noticed that you had used the term "lassitude", when I would have thought you meant "lattitude".

I wasn't sure of the definition of the word, so I looked it up... has this definition for lassitude:

"A state or feeling of weariness, diminished energy, or listlessness"

So, the sentence you wrote might actually be:

"There has always been a state or feeling of weariness, diminished energy, or listlessness when the 'deeming' is viewed as having happened"

... which actually makes perfect sense now that I think about it ;-)

Ahh, the thrills and excitment of accountancy and taxation !


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Reply: 1.1.1
From: Dale Gatherum-Goss


The tax office deem a sale to take place on the signing of the contract unless there are special conditions that must be met before the contract is valid. Then, the date of sale will be when the conditions have been met.


Sometimes even known as Dale Gatherum-Goss, but, hey, I'll answer to almost anything ;-))
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From: Aaron Dwyer

Well there you go.

Thanks Dale.
Aaron Dwyer
~ To know and not to do, is really not to know at all.
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