Hi this is my first topic post but i regularly read so I aim hoping i can get some help in regards to my situation. When I was 18 i invested with my dad into a property for 630,000 now expecting that property to sell next year for around 850,000 so just waiting for us to pay half CGT and by my calculations we should be left with roughly 170,000 in cash so i was thinking of buying another small property straight with cash but was thinking of buying it myself so that we wouldn’t have to pay any CGT for the rent as there would be no loan. So according to my reading this is possible but I just wanted to ensure i was on the right path. Any help would be much appreciated. I am currently 19 and at uni so taking out a loan for the property isnt something i want to do.
If you do not want to pay CGT do not sell it in the future (buying another small property straight with cash).
or minimize it by selling it in a financial year you do not earn income. Note Austudy, Centrelink or Parenting Payment, ECT previously paid to you would be clawed back if Austudy or other payment was paid say to December 2009 and you sold with a capital gain in same financial year up to 30 JUNE 2010.If you rent out the property you are using the property as an investment property and capital gains tax is payable on any future capital gains. If it was your main residence ie you lived in it and then decided to rent it out you may be able to retain the main residence exemption for 6 years while renting it out to someone.
see
http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm
Note: you cant have two main residences as explained in above ATO link.If you get Austudy and Rental income it may add up to over $6000 a year and the rental income would effect the Austudy payment calculation by Centrelink and be taxable income.
(negative geared losses are deemed as income by Centrelink and Family office for calculating your payments)If you rented out part of the house it would be capital gains tax liable if you make a capital gain.
see
http://www.ato.gov.au/businesses/content.asp?doc=/content/43142.htmAlso
if you have owned half of you fathers house as joint ownership your CGT is
50% DAD 50% You
if you have owned it for over twelve months
50% DAD * 50% discount =25%
50% YOU * 50% discount = 25%
http://www.ato.gov.au/individuals/content.asp?doc=/content/36552.htm$850,000 – $630,00 = $220,000 capital gain excluding cost base second and third components you may be able to add to cost base!
$110,000 DAD $110,000 YOU 50% ownership
$55,000 DAD and $55,000 YOU 50% discount
You are at university so tax rate may be 15% if on low income say example of $15,000
from $6000 to 15,000 = $1350 tax (15%)
from$15,000 to 34,000 = $2850 tax (15%)
from 34,000 to $55,000 = $6300 tax (30%)
Normal tax $1350 plus $9150 for capital gain total tax $ 10500.
so cash of $100850 after tax
really depends on what other income you earn for the year see tax scales as taxable cg $55,000 added to other taxable income
to come up with new taxable income.
http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htm
You said we so DAD
lets assume DAD earns $80,000 a year normally
tax on $80,000 = $18,000
add on $55,000 extra tax is $22,000
total tax $40,000
cash for DAD part = $110,000 – 22,000 = $88,000 cash left over
can use this calculator to work it out
http://calculators.ato.gov.au/scripts/asp/simpletaxcalc/main.asp
Really depends on DAD's assessable income for wagesWE total cash is $88,000 + 100,850 = 188,850
I haven't factored in selling commission for agent and legal fees for conveyancing !
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