Is this a little too creative.
Suppose I sign a contract for the same amount the vendor bought it for (no CGT then) and sign an additional promissory note for the rest.
Can this be done.Thankyou
Don’t imagine so, but I am not a legal eagle so who am I to say for sure.
The taxation dept is not that trusting, and CGT is not calculated simply on guessimated profit, but takes into consideration “market value”. Hence as a vendor you have to prove what “similar” homes in the area were sold for. For example if you declare that you sold a house for 200K but similar ones (size, style, age etc etc) in the area are selling for 300K the ATO is going to become suspicious. Besides you will be required to produce an INDEPENDENT VALUATION for CGT purposes. Heresay is fine between you and me, but the taxman won’t be so easily appeased.
Nice try!!!
This I guess would come up as being a transaction that is simply trying to avoid tax, so you would be prosecuted if you did it for the tax benefit.
Rgds.
Lucifer_auScullyman,
I’m not a legal or financial person either, but I would imagine that would be worse. The promissory note might be considered as income to the vendor (assuming they declared it), so they’d miss out on the 50% CGT discount they might otherwise be entitled to.
Also, the fact that you’re trying to help the vendor save on CGT indicates that the transaction is not arms-length. You may end up with the ATO valuing the house at market value for CGT purposes AND hitting the vendor for income tax on the promissory note.
But as I say, I’m not an accountant so this is all just conjecture.
GP
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