I have 3 IPs , 2 in Sydney, one on the Gold Coast.
My loans total 750 K, and if I sell 2 of them, I can get 800 K and place the 3rd most valuable property in a Self Super fund.This means I would have no capital gains tax on my residential home, and my now 1 IP revenue producing estate will be protected from heavy capital gains tax in the Self Super Fund.Does this seem like a good strategy?I think you would have to take alot of factors into consideration one of the main ones beening how long till you retire.
when you sell your existing properties you will be up for CGT, then if you hold the bulk of your equity in your super fund it may limit the amount of investing you can do as you won't be able to lend against the property in the super fund.
I would probally rather hold three properties and earn $300,000 in capital growth and pay CGT out of that, than hold one property and earn $100,000 capital growth and not pay CGT,
but as I said I havn't spent the time going over the ins and outs of super rules yet, I am only paying the minimum into my super at the moment, a good finanicel planner should be able to give you some advice on retirement stratergy,
remember if you are not planning on selling your properties till you retire, you can time the sale of them so that you sell them in a financel year that you have no income from your job so your tax will be reduced, and you get a 50% CGT discount any way.
May seem like a good strategy if it was legal.
Unfortunately you are unable to transfer residential property into your SMSF.
Certainly you can buy a residential property in your Super Fund however you cannot transfer a property like you can a Commercial security or share portfolio so a sale will trigger CGT.
Richard Taylor | Australia's leading private lender
thanks Tysonboss1 and Richard.
So Richard what you are saying instead of transferring the property into the Super Fund, I would have to sell it first, pays CGT and buy another property to place in the Super Fund?Im sorry, but I was under the impression that a Ppor could be cgt defered by taking the money from the sale , pay off any mortgage you have then buying the new Ppor and defere the Cgt all together ? or some thing like this…
is this correct ?
Hello Nucopia
There is no CGT on your PPOR. It's not a question of deferring it. It is just not applicable.
The post above refers to investment properties on which unfortunately you do have to pay CGT on selling…. assuming you made a gain.
Cheers
ElkaNucopia wrote:Im sorry, but I was under the impression that a Ppor could be cgt defered by taking the money from the sale , pay off any mortgage you have then buying the new Ppor and defere the Cgt all together ? or some thing like this…
is this correct ?
There is no CGT on PPOR, what you are talking about deffering CGT on investment is not applicable in australia it is an American thing.
thanks Guys..
another question ..how much do you pay in CGT % wise ?
1 if you have no taxable income …
2 if you own the i.p in a trust/company name ..?
just wondering
cheers
Hello Nucopia
The capital gain you make on a property is just added to the rest of your taxable income for that year and taxed at your top marginal tax rate. If you have had the property for more than 12 months you get a 50% discount on the gain.
Naturally if you have no other income for the year that you sell the property the tax will be lower.
If the property is held in a trust then the advantage is that you can apportion the capital gain between beneficiaries to try to minimise the tax by giving more to the lower income earner(s).
There are other things that you can do to minimise CGT such as contributing extra to your super fund so the best thing is to talk to your accountant before you sell an IP.
Cheers
ElkaHi Elka
I have no taxable income at all, but I do have i.p's in the name of a company/trust.
if I was to sell an i.p the company has owned longer then 12 months for say $20,000 capital gain, what would I be liable to pay in CGTax ?
company tax rate is 30% so half is 15% is that correct ? if I have past tax credits and franking credits from shares can I write some of this off on my over all taxable income of the company ? and lower the amount of CGtax I pay on the $20,000 ?
Also when is the CgTax removed at settlement , so the amount received is less the cgt or is it done on the next tax return ?thanks for any info appreciate it !
tnx.
Hello Nucopia
You've got quite a few things mixed up here. Keep in mind that I am not an accountant.
In a trust/company structure the trust owns the IP not the company. The company is the trustee of the trust.
The 50% discount you get if you've had the IP for longer than 12 months is not on the tax rate but on the amount of the gain that will be taxed. In your example, if you have a total CG of $20,000 then you will be taxed on $10,000.
CGT is not a separate tax in the same way as stamp duty or land tax. What happens is that you just add the capital gain that is taxable ($10,000 in your example) to your other taxable income for that year and it gets paid at tax time. Any losses, tax credits etc. will reduce the tax you will need to pay.
After calculating the CG and taking the 50% discount, if applicable, just think of what is over (the $10,000) as any other income for that year. Don't forget that rental income, dividents, interest etc. etc. is all income not just wages.
Hello CyberMicah
The answer to your question is yes. You would need to sell and pay CGT. It may be possible however to buy the same property in your super fund.
Hope this helps
ElkaHi Elka
Ok now I see what you mean,
its 50% of the total gain (20 / 2= $10,000)
its paid at tax time when I submit my company return and
if in the mean time I re invest the capital gain into a deposit on another i.p and the company has any tax credits franking credits etc and deductable losses. Then in theory at tax time , I will not be liable to pay any cg tax on the imaginary capital gain…
very nice ..
thanks again !
sorry i have taken this thread off TopicThanks Elka , understood.
Hello Nucopia
Do you have a good accountant who can explain it all to you because there are a couple of things in your posts which show that you may not understand the structure your IP's are in and how it all works.
You are in Australia I assume? There is no system in Australia whereby you can defer paying CGT by buying another investment property. CGT must be paid in the tax year that you sold the IP.
Usually a trust distributes all profits (including the CG) to one or more beneficiaries. I believe that if this is not done then the trust is taxed at the top tax rate for undistributed profits… but as I said, I am no accountant so I can't vouch for that part.
The beneficiary then declares this as income on their tax return in the normal way.
The trust also needs to submit a tax return each year but as all profits have been distributed there is no tax to be paid by the trust.
I hope this makes it all a bit clearer.
ElkaYeah,I think you should sell now.Because it is good for you.
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