Valuation & claimable expenses

Hi Simon,
Note I am not an accountant or similar – so this are what I “think” is the situation:-

If I purchase a ip & Reno am I up for cgt from day dot

No CGT until you sell – but (what I think you are meaning) are you wondering what Cost Base that CGT is calculated from? As I understand it, the Cost Base is calculated from the Purchase Price, Costs of Purchasing, plus any Capitalised expenses (e.g. the reno you are just doing). As an example, let’s say you buy for $400k, it costs $30k for Stamps and/or other purchase costs, and then you spend $40k on a reno. The cost base would therefore be 400 +30 +40 = $470k.

Then, when you sell it, the price you got, less selling costs is used to determine the Capital Gain. e.g. you sell it for $620k, and it costs $30k to sell, so $590 less the Cost Base (470) is your Gain. You then get taxed on $120k (or 50% of that if owned for more than a year) at your Marginal Rate.

That’s roughly it – other things do come into play, but that is where more advice is needed. e.g. other Capital Costs you might expend during the years you hold the property, and there seems to be something else involving Depreciation that I am not sure about – perhaps others can step in with some thoughts there….

or can I get a valuation done before it is rented after work is completed?

You can choose to get a valuation done any time you like – I don’t believe it would affect anything re CGT or the calculation thereof – but hey, I could be wrong…. let’s hear from others on that, as I am still learning too…. ;) And there might be other benefits of doing such a val (unrelated to CGT).

I hope that is some help,

Benny

It all depends. Cgt may not apply and you may be taxed as income under some situations.

No need for a valuation unless it was your main residence.

All holding expenses could be claimed in some circumstances while you are holding and renovating even though you are not advertising for rent but only where you intend to rent it out after finishing.

Probably would be deductible if your intention was to rent it at end of Reno’s. See Steele’s case.