Hi
My husband and I have had an IP for 16 years, we paid $80 Or $85K (not sure which). Due to tenant problems we are considering selling, we are pensioners and are concerned how much tax we will have to pay if we sell.
Our pension is around $34,000 p.a. We hope to sell the IP for $300k, would we pay Capital Gains tax on $215,000 plus pension $34,000 = $249,000, $124,000 each for tax.I am assuming that the mortgage would also be deducted from the $215,000 and hopefully the costs of the sale.
If we put in new carpets and blinds can we claim it back?
Many thanks, hope that I haven’t been too confusing.
Madison
@madison889 Firstly I will just say please consider getting good advice from an independent experienced accountant. This is a specialised area and it is always worth getting good advice it will save you in the long run. My thoughts are potentially worthless but should get you started at least.
Secondly I have no knowledge of how capital gain events are applied to the pension, this is important and worth checking with the accountant as per above.
Thirdly the cgt will depend on your ownership split, you will pay a little less if it is 50 50 and from your wording I will assume this is the case.
Fourthly the cgt 50% reduction is the biggest policy you need to know about for properties owned over 12 months. Basically half the total gain is taxed.
Fifthly renovations can be added to the cost base, repairs claimed, so either way if you sell you wont pay double tax on the blinds or gain.
Sixthly the mortage total isnt deducted, the ATO doesnt care whether you bought for cash or had debt, just that you made a gain, but mortgage discharge fees will come off the taxable gain and sale costs do to.
Now – for a laymans rough check over this is what I would assume in terms of cgt numbers are very rough you will need to work them out properly
85k purchase, sale 300
total gain 215000stamp duty and costs at purchase 3000
reno 5000
sale costs 8000
taxable gain 215000-16000 = 199000
50% reduction due to length of ownership leaves taxable gain = $99500
ownership 50 50
total taxable gain each = $49750 (amount to be added to your pensions)NOW – If you are considering selling due to tenant problems, can I ask why don’t you terminate the lease at next review, put in the new carpet and blinds and put a better tenant in? It would save selling altogether and keep the rental coming in. Of course if you need to sell or want to for other reasons, then go ahead I just wanted to ask.
BuyersAgent | Precium
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Thanks for the reply
The previous tenant stopped paying the rent and damaged the townhouse and would you believe the current (?) tenant stopped paying the rent on 21/9 was given all the notices and was supposed to leave on Thursday, she or someone for her has dumped her possessions at the front of the townhouse which is left filthy inside. She sent the PM a text to say she was staying elsewhere and a cleaner would be there Friday to clean and she would drop off the keys.
Have you had any experience with a similar situation? From what I can find out we would have to call in a removalist and put goods in storage and then auction them in a months time. Thankfully I have landlord insurance with Terri Scheer.
The PM was ok the past few years when everything was running smoothly now I am having to chase her up to do anything, in fact the PM wasn’t even going to issue any notices and sent me an email saying that the tenant knew that we couldn’t ‘take any action as her lease expired on 8/11 and getting an order from the tribunal would be too expensive for us!
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