Understanding CGT

[hrhpablo]

So, my parents and I have two properties which we're looking to sell on the North Coast of NSW. They look like they're going to sell for about $200K each MORE than we paid for them, about 5 years ago.

I have had several different %'s thrown at me as to what I can expect to get slugged in CGT and am confused about what I can and can't use to offset CGT in terms of costs or expenses.

There are also some questions about NSW state exit tax (or whatever it is called).

Anyone care to shed some light?

 

[coastymike]

hrhpaulo,

A few questions before anyone could give you some answers :

1. Are these properties used as your main residence or where they used as your main residence during the period you owned them ?
2. What particular costs are you talking about ?
3. With respect to the NSW vendor duty are you wondering whether it gets added to the cost base ? The answer is yes.
4. Did you claim the 2.5% capital allowance during the period of ownership ? (Where the properties eligible for the 2.5% (4% if the property was constructed during particular years) capital allowance - if the properties are eligible and you haven't claimed the allowance then technically the ATO will reduce the cost base of the asset - a lot of people think that they won't claim the capital allowance during the period of ownership and therefore it won't reduce the cost base on sale. This is a common misconception.
5. Did you do any repairs during the period of ownership ? Where they classified as repairs or capital improvements ?

 

[Merovingian]

So, my parents and I have two properties which we're looking to sell on the North Coast of NSW. They look like they're going to sell for about $200K each MORE than we paid for them, about 5 years ago.

I have had several different %'s thrown at me as to what I can expect to get slugged in CGT and am confused about what I can and can't use to offset CGT in terms of costs or expenses.

There are also some questions about NSW state exit tax (or whatever it is called).

Anyone care to shed some light?

Well, you're saying that you purchased during 2000. So:

Let CG be the capital gain on a property; CGT be the tax you'd pay.

Then CG = (sale_price - purchase_price + special_building_write_off - capital_costs) / 2;

Therefore, CGT = CG * marginal_tax_rate.

marginal_tax_rate is defined at www.ato.gov.au.

Your profit would be: P = CG - CGT.

I think I've got it right... Feel free to correct me if I'm not.

Hope that helps.

 

[hrhpablo]

My apologies for not being more specific. To clarify, these are both vacant blocks of land, so no, they have never been a residence of any sort for us. We have built a fence with the neighbours, but apart from that and regular mowing, have not done a thing to the properties in terms of improvements. I have to say that copping CGT when you haven't earned a cent in rent, for example, is infuriating, but I guess I'm just whinging now.

The costs I was referring to were the bridging finance and other related interest on the initial loans for these properties.

 

[hrhpablo]

Sorry, I hadn't quite finished that post. We're also we're trying to understand what can be offset against CGT. What about rates? I understand any agent and solicitors fees will be offset against it. Anything else in my situation?

 

[DaleGG]

HI

You can also deduct from the CG calculation costs such as:

insurance
rates
land taxes
maintenance
travel re maintenance (ATO ID 2003/772)
interest on loans to buy the block
borrowing costs re buying the block

Providing, that these costs have not been claimed as a tax deduction on your respective tax returns.

Dale

Sorry, I hadn't quite finished that post. We're also we're trying to understand what can be offset against CGT. What about rates? I understand any agent and solicitors fees will be offset against it. Anything else in my situation?

 

[geoffw]

Is the NSW exit tax also deductible against the cost base for CGT?

 

[Mry]

Is the NSW exit tax also deductible against the cost base for CGT?

Yep.

Most "deductible expenses" can be added to the capital base of an asset that has not been used for income producing purposes.

 

[hrhpablo]

Thanks guys, really appreciate the help. Am discussing this info with my parents now, which will no doubt result in another question for one of you