When is the purchase date for tax purposes?

[Bantam Roosta]

I signed the contract for my latest IP on 28 May and it settles 4 Jul. When is the purchase date for tax purposes and will I include the purchase/costs in this year?s tax return?

I understand that solicitor fees, building/pest inspection, stamp duty etc are either capital expenses or borrowing expenses, so the date of purchase doesn't really matter for these, but my building insurance for example, if I paid it this FY, can I claim it this year, as I don't yet own the property?

I tried looking at the ATO website, but I couldn't work it out.

BR

 

[Paul@PFI]

Acquisition for CGT = Date of settlement
Disposal date for CGT = Date of contract
Disposal Date for Income Tax = date of sale settlement.
Actual period of ownership (day) = Date of sales settlement less Acquisition date (Thats right....No of days will not be same for income tax and CGT !!)

eg : Its common to sell a property for CGT on 28 June yet still have July + Aug rental loss in the next year.

You wont include this property in your 2014 tax !!

 

[speary]

Your CGT acquisition date is the date of contract per
https://www.ato.gov.au/General/Capi...ng-and-owning-CGT-assets/Date-of-acquisition/

but as Paul said you can't claim the settlement adjustments in the 2014 year as they are calculated based on settlement date which is in the 14/15 year.

 

[marg4000]

I thought it was always the date of the contract for both purchase and sale of property.
Marg

 

[Bantam Roosta]

Confusing, but understandable. I thought similar to marg, which is why I am seeking clarification.

You wont include this property in your 2014 tax !!

So how do I claim my building insurance on my tax return? I can't claim against an asset I don't own, can I?

Would anything change if settlement was in June? Any good reason to try and bring it forward?

BR

 

[speary]

I don't think you would have a problem claiming the building insurance in the current year, even without any rental income. Bringing the settlement forward won't make a huge difference, you will be able to claim the adjustments but they will only be for a couple of days so no huge benefit there.

 

[GaryT]

Acquisition for CGT = Date of settlement

Acquisition date for CGT is (usually) the Date of Contract

 

[Paul@PFI]

Good pickup GaryT but I didnt say it that way for a reason. I avoid mention of the precise timing of acquisition as its never that simple even when its put that way. Its something you get with advice This really highlights the simple ways DIY taxpayers make mistakes.

s109-5 contains a large number of exceptions plus if there is no CGT event then the rules change (s109-10). For example, I buy a house and land from Clarendon Homes. There is no CGT event (its a revenue event). The acquisition is determined by s109-5(1) when I become owner. ie settlement. Other common examples are acquisition from a developer, builder constructs on my land, DIY build etc...

A common mistake is illustrated in the following example - (Ignore the MR exemption) is thinking that they contract to buy land on 10th Oct12 and take possession 10th Dec2012. They contract to build with start in Jan13 and its finished 2nd July 2013. What is the CGT date of acquisition ??....So they sell on 31st Dec 2013. What is the CGT problem ??

 

[Paul@PFI]

Your CGT acquisition date is the date of contract per
https://www.ato.gov.au/General/Capi...ng-and-owning-CGT-assets/Date-of-acquisition/
QUOTE]

It depends !! A contract to buy a new house and land from Lend Lease is very different to buying my home. Lend Lease sell property on revenue account and there is no CGT event so the date of ownership prevails. If I sell my home its a CGT event (exempt) and the contract date prevails. This illustrates one of the dangers of relying on the vague words on the ATO website. They over simplify and as a result it can be wrong.

I also note that ATO webpage refers to a one tonne ute as a CGT asset. Hmm.....A strange thing to say. I cant really think of ANY circumstance where a one tonne ute will be a CGT asset - Normally acquired as a trade use its a business asset. A boat is exempt as a personal use asset unless its used in a business...Then its not a CGT asset.

 

[Rixter]

Great back peddle followup Paul.

What's the saying?- “If you can't dazzle them with brilliance, baffle them with bulldust.”

 

[Paul@PFI]

LOL - I have to charge extra for BS. plus GST.

Its a common problem. I hate mention of CGT dates, cost base and several other issues in posts as it can be read far too literally. I take the view using SS that I must over exaggerate so the worst case tax cost is identified rather than the best case. ie : The acquisition date is the shorter period so a apportioned CGT calc would yield a higher tax outcome than it should. I dont mention contract date as I dont know how it is acquired or who from etc.

No matter what is said it seems someone will have an exception. Gifted, inheritance, deceased estate, trust vesting.......Nobody wants to read a metre long post. They are misunderstood and guess who has the PI ... Its one of the issues SS users should always be mindful about. Beware of statements and dont act on anything written here without personal advice.

Its why I really do invite private mails and am usually happy to consider a brief question made privately.

 

[speary]

Paul, it is my understanding that the one tonne ute that you speak of is a CGT asset, however there is a specific exemption under s118.24 for depreciating assets. This doesn't prevent CGT event K7 occurring on disposal if there is a private use portion.

In the case of purchasing a property from Lend Lease, I am not sure why how they treat the sale, i.e on revenue account, affect my purchase of a capital asset. In the case of an off the plan property, my understanding is that you can sign a contract to sell the property the day after settlement and incur no CGT as your acquisition date is going to be when you signed up for the property..

Not really interested in having an argument but like to use the forums as a bit of a test of my knowledge and to understand the intricacies of more complex transactions which don't occur as often.

Cheers

 

[luckyone]

Bringing the settlement forward won't make a huge difference, you will be able to claim the adjustments but they will only be for a couple of days so no huge benefit there.

I think bringing the settlement will make a huge difference. Correct me if I'm wrong, but if you do bring forward settlement to June 30 or earlier you'll be able to claim this year's depreciation in full. I think that's a pretty big difference!

 

[Paul@PFI]

You cant claim a full year depreciation ! You would be eligible to one day's depreciation and capital allowance.