Tax Advice

From: Sherlock .


I have recently settled on my only PI. The strategy being to reduce personal debt. As a result I have increased equity in my own home, approx $450,000. So I intend to reinvest in property.

Can anyone suggest how I can minimise the impact of CGT in this financial year ie will stamp duty or interest in advance on a new purchase help.

Or put me in touch with a switched on account in Melbourne.

Cheers, Sherlock.
 
Last edited by a moderator:
Reply: 1
From: Dale Gatherum-Goss


HI Sherlock!

Congrats on the new property!!!

Could you please rephrase your situation a little more so that I can help you. The CGT is calculated taking into account the following:

Purchase price
Stamp duty on purchase (except for the ACT)
Legal fees on purchase
Other costs involved at purchase
Real estate fees on sale of property
Legal fees on sale
Other cost on sale
Running costs not claimed as deductions during the ownership period.

Minus the sale price.

This is our gain and half of it is exempt if you have owned the property for more than 12 months.

What's left after the discount is taxed at your normal rate of tax and buying another property will not help.

Does this help? If so, great. If not, as I mentioned earlier, if I can get more information I might be able to be more specific.

Dale
 
Last edited by a moderator:
Reply: 1.1
From: Sherlock .


Hi Dale

I happen to have just emailed you, that's sychronisity!

I have actually sold, leaving me with only my own home. I have done the sums on what my CGT bill will be. I guess my thinking is that if I am intending on reinvesting in property it may be an advantage to do that in the same financial year as the CGT bill. Hence my thought that if I cop stamp duty on purchase of new property/s that should assist in bringing down my unusually high taxable income.

Is that clear as mud?

Sherlock
 
Last edited by a moderator:
Reply: 1.1.1
From: Dale Gatherum-Goss


Hi Sherlock

No. The purchase of a new property will not help reduce the gain on the sale of the old property and will not therefore reduce your tax.

Sorry

Dale
 
Last edited by a moderator:
Reply: 1.1.1.1
From: Jas



>
> From: "Dale Gatherum-Goss" <dalegg@bigpond.net.au>
>
> Hi Sherlock
>
> No. The purchase of a new property will not help reduce the gain on
the
> sale of the old property and will not therefore reduce your tax.
>

But, paying the year's interest (on the new property) in one hit will.
You just have to convince the ATO you're not doing it to avoid tax.
Negotiate a rate cut with the bank for paying it in one hit, and viola,
you have a non-tax reason for doing it.

Jas

(but, as I'm not a tax accountant, double check with yours :)
 
Last edited by a moderator:
Reply: 1.1.1.1.1
From: Dale Gatherum-Goss


Hi Jas

Yes, you are right. I was being "literal" with the CGT and didn't consider this idea. Well done!

Dale
 
Last edited by a moderator:
Reply: 1.1.1.1.1.1
From: Les .



G'day Sherlock,

Consider also, that where you BORROW for any "non-deductible" costs incurred in the purchase of another IP, the COST (setup fees, interest, etc) of the borrowings should be deductible.

As I understand it (and I'm NOT an Accountant, so this is simply an opinion...) if you can arrange things so that any capital costs were BORROWED, then the setup costs and interest on those borrowings ARE deductible.

So, if you were to buy another IP in this financial year, and pay all rates, RE fees, maintenance, capital costs, mortgage interest in advance, renovate, etc. by borrowing them, then the cost of setting up the loan and the interest on that loan (even paid in advance too??? - opinion, please Dale) could maximise your deductions in this year.

Using the thought that capital costs or purchase costs may not be deductible, but BORROWINGS to pay those costs ARE, might give you another angle of attack....

What do you say, Dale? Any holes in that theory that you can see?

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
Last edited by a moderator:

Sim

Administrator
Reply: 1.1.1.1.1.1.1
From: Sim' Hampel


I think you are on the right track Les, but note that some of these things (like the borrowing costs - stamp duty/LMI etc) may have to be depreciated over 5 years rather than claimed upfront in the first year.

Check with your accountant.

sim.gif
 
Last edited:
Reply: 1.1.1.1.1.1.2
From: Dale Gatherum-Goss


HI Les!

Your thinking is on the right track, alright although as Sim also says, the actual costs relating to the new property might be written off over 5 years if it is a standard loan of 5 years or more.

Sherlock, i would spend some time with your accountant so that they might crunch numbers for you and assess the damage involved.

Then, they might be able to come up with scenario's that help reduce this damage.

The forum is probably not the right place to discuss your situation in too much detail but more information would have helped rather than less.

Good luck

Dale
 
Last edited by a moderator:
Top