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Hi Paul,
Capital Gains Tax (CGT) is the tax paid on any Net Capital Gain made on an asset that is sold, and is included in your Income Tax Return. As Elka has explained a 50% discount on assets held at least 12 months is applied to the Net Capital Gain. CGT is not a separate tax but forms part of your income tax payable. For 2007 taxable incomes $25000 – $75000 the CGT is payable at a rate of 31.5%, up to a maximum of 48.5%.
I'd suggest you also have a chat to your Accountant.
Hi there,
This is your money and your future at stake here, so its really important that you understand these figures, and not put so much trust in the hands of a total stranger. You really need to do these calculations yourself.
We have several free downloadable templates/spreadhseets on our website that will step you through the process.
Happy number crunching!!
Try contacting Tom Armstrong from Ipswich. He's also a forum member here.
Yes I agree with Duxster it is how the funds are used and not what property is mortgaged that is relevant. Probably the only other way would be to sell it to a Family Trust, but you'd have to pay stamp duty then, so you're caught both ways.
Being your PPOR though there would be no CGT if you sold it now, and rented while the other place is being built.Wow what a great start at such a young age. Perhaps you can move in so you get the 1st home buyers grant and rent out the other rooms for some extra cash.
I'd suggest you pay for an independant valuation though before you sign on the dotted line, just to protect yourself!!Yes, most of the information you seek can be obtained for free from your local Council, you just need the time to do the running around.
I'd suggest you look at using a QS for a newer property as they'll do a personal inspection and pick up many items an Accountant may overlook from behind a desk.
Try contacting Matthew Quinn from Catalyst Property Services. Here's his link: http://www.propertydivas.com.au/7ProfServ/Professionals.aspx?cmaid=9698e357-b6ce-4e7c-8f1c-d813757e1b53&cmstat=Profall They are based in Adelaide but have branches Australia wide.
Hi loveinvesting,
If you need any further details on Ipswich please feel free to drop me a line,
I'd suggest you have a look at Ipswich as the area is expected to triple in size over the next 20 years. An average house in good condition will cost $220 $250K and you should expect 5-6% return.
Daryl wrote:Thanks Amanda;What aspects would complicate things?
There are just so many steps, tests and reports and each takes time. The following is an extract of a document off our website that explains further about subdividing:
What is Subdividing? Subdividing is when a piece of land is split into two or more pieces (ie separate lots). The process is controlled by the local Council. Planning codes and procedures vary significantly between Councils and also between States and Territories, as do the relevant fees and charges. Factors to examine when considering a Subdivision • Local town planning regulations - Land zoning restrictions
- Minimum size of lots
- Access to water and sewerage services
- Setback requirements
- Minimum building envelopes
- Parks and open space
- Easements
- Vehicle access including Council refuse collection
- Storm water management
- Increased noise from new development
- Environmental and heritage issues
Hidden Costs A subdivision can take several months (and sometimes even years) to complete so you must factor in your holding costs such as:
• Interest
• Rates
• Land maintenance – (eg slashing and weed control)Many astute Developers make the purchase contract for the land subject to the acceptance of a Development application approval with Council. This is usually done with an option agreement (see your Solicitor for more information)
Dividing the Land Before you rush out and build a new dividing fence in your backyard, you should first consult your local Council for specific guidelines and costings, as it is imperative that the property is divided correctly. Any errors at this stage will cause major problems further down the track. The Process Most Councils require a Development/Planning Application to be lodged, together with details and drawings of your proposal. A Town Planner or Surveyor can assist you with this process, and they may also be able to give advice regarding conditions that the Council is likely to require. Before lodgement of the Application, you can ask the Council for a “Pre lodgement” meeting to discuss your subdivision and determine what issues will need to be addressed in the Application.
When the Council receives your application, they may require you to erect a notice board for public viewing. The purpose of the board is to alert the public of the proposal by providing details of the subdivision. The Council may also write to the owners of the residents of the neighbouring properties advising of your intentions. We suggest that you contact the Council to find out what procedures your local Council uses.
Additional information the Council may require Water and Sewerage • Are existing services available?
• Can the existing infrastructure cope with increased use or need upgrading?
• Is permission required from neighbours to access property?Storm Water • How will storm water run off be managed?
• Is a drainage pit required?
• Are tanks required to regulate the flow of storm water?Noise • Will existing main road traffic noise affect the subdivision?
• If so, how will this be reduced? (Fences and/or earthworks)Soil Conditions • Do the soil conditions (eg.sand, clay) impact on road and footpath design? Other issues - Footpath
- Lighting
- Signage
Issues for the Developer to consider For the Developer there are also other issues to consider such as: - “Wasted” land due to unusual configurations
- Steep slopes
- Flood-prone land
- Other planning overlays (ie restrictions)
- Other factors that may reduce the number of lots and so profitability.
Approval of the Development Application The approval process for your Application may take several months depending on the complexity and size of the subdivision. You will then be issued with a conditional approval covering topics such as:
- Developer to supply a plan of survey and mark land with survey pegs
- Road reserve
- Easements over stormwater, water and sewage mains
- Requirement that storm water pipes be designed to cope with a “1 in 100 year” event.
- Dust control
- Hours of permitted work (usually Mon – Sat 6:30am to 6:30pm)
- Headwork contributions to be paid by Developer
- Open space (parks)
- Social infrastructure
- Road infrastructure
- Water infrastructure
- Sewerage infrastructure
- Street scape contribution
- Disposal of cleared vegetation
- Entry walls or features
- Connection fees to live sewer mains
- Road (width, pavement depth, footpaths, kerb and channel, ramp profiles)
- Street lighting
- Fire Extinguisher (Battle axe blocks)
- Underground electricity and phone
- Erosion and silt management
- Maintenance period of roads
- Retaining walls
- Fire ant inspections
- Portable long service leave for Building and Construction Industry
If you are not satisfied with the Council’s decision, you may apply for a review.
Operational Works Before work can begin, you will need to engage the services of a Civil Engineer to design and draw the sewer, water, road, footpaths and any other Council requirements. This is a separate application usually referred to as “Operational Works” and attracts additional fees and charges.
Final Stage All civil work will require Council and Engineering certification. When the subdivision has been completed to the satisfaction of the Council, you can then apply to register each separate title deed. Conclusion Land subdivision is a $mart way to fast track profits into your investment portfolio. However, as with all investment decisions, thorough research is necessary in order to balance the level of risk associated and ensure that the process runs as smoothly and quickly as possible, and that the best, most profitable outcome is achieved. Thanks ao…I'm also a firm believer in Karma.
We use http://www.abr.com.au
The annual subscription fee is $200. Reports can be downloaded direct off the internet within seconds and you pay around $20 – $60 depending on the type of report. It really doesn't matter how much the current owner has paid for the property, what you need to consider is what similar properties within 1Klm radius have actually sold for recently. These figures, including names, address, date, RP number, land size and sale price are all available through ABR and most other online data sites such as RPData. Grab you list and jump in your car and go for a drive!Hi Col,
In order to be eligible for an immediate writeoff expenses must be directly related to renting the property and returning it back to its original condition. One on the cheapest ways of course is a coat of paint after you've had the place tenanted for a while.
As Brett has said though if you improve the property with a new kitchen, bathroom etc. these will be treated as capital improvements and only eligible for the 2.5% writeoff.
The following is a list of the most common rental expenses you can claim:- Advertising
- Body Corporate fees
- Cleaning
- Council Rates
- Gardening
- Insurance
- Interest
- Land tax
- Legal fees relating to tenants
- Pest Control
- Property Management fees
- Motor vehicle per km
- Repairs and maintenance
- Stationery, phone and postage
- Travel and accommodation
Decline in value (Your Accountant will calculate this)
Hi Daniel,
Wow, I can't believe you're only 22 years old, boy at that age I spent every last cent on clothes and night clubs….Yes those were the days!! I certainly wasted a lot of $$$$ in those days but had fun doing it.
Anyway back to your question. The reason Steve could buy multiple properties back in those days was becauase they were cash flow positive (CF+) meaning the rent paid all the expenses including the loan, so getting a loan was much easier. Secondly he also purchased the properties through a Family Trust, so it was the trust borrowing the money and not Steve himself. He'd of course go guarantor for the loans and when the bank thought he was at the limit he'd repeat the system again with a new Family Trust. Times have changed and buying multiple properties so quickly is not as easy, but also not impossible. So I'd suggest you establish a good savings record and have a chat to one of the many Finance Brokers here on the forum (eg. Qlds007)
Best wishes and keep reading!
Subdiving the block may take longer than you expect, 6 months, 12 months or even years depending on how complex it is. So I'd suggest putting in a tenant on a 6 month lease and also lodging the DA at the same time.
By the way what rules are you expecting Coucil to change?If you choose a property in Ipswich, then I'd suggest Vanessa Mathewson of Walkers Quality Rentals Ph 07 3812 8455
Hi Bradles,
The following is an extract of a document off our website that explains further about capital gains tax.
Capital Gains Tax
Capital Gains Tax (CGT) is the tax paid on any Net Capital Gain made on an asset that is sold, and is included in your Income Tax Return. CGT is not a separate tax but forms part of your income tax payable.
The system has changed over the years since inception on 19th September, 1985 so we recommend you seek independent professional advice from your Accountant.
Two methods to calculate CGT
(1) Indexation
Applies to property purchased up to 21 September, 1999 where the cost base is indexed according to inflation.(2) Discount (Current Method)
A 50% discount (on assets held at least 12 months) is applied to your Net Capital Gain. This discounted amount forms part of your taxable income and is taxed at your marginal rate, up to a maximum of 48.5%One third discount applies to Superannuation Funds and there is no discount for Companies.
Keeping records You must keep your records for 5 years from the date you sell the property. Balancing Charge To calculate the capital gain your Accountant may need to reduce the “Cost Base” to the extent that it includes amounts you have previously claimed for Depreciation and Capital Works deductions.
If you are intending to sell a property, we strongly advise that you discuss this issue of GCT with your Accountant before you sell the property, to ensure that you are aware of the CGT implications.What date on the contract is used to assess CGT? The date on the Contract of Sale is used for CGT purposes – regardless of when settlement occurs. Yes I'm pretty happy…can't see them moving in the next couple of months with an election on the way!
seals139 wrote:Yeah I lived in it for about two years, and have owned it less than six years Sorry Richard but I disagree with you here! This alone does not make the property CGT exempt. You can only ever claim one PPOR at a time. Seals, where did you live for the other 4 years? For example if you rented or lived with parents for those 4 years you may be Ok and not pay CGT, however if you owned and lived in another property as your home then CGT will apply to some portion.
Need more details……I'd suggest contacting Matthew Quinn from Catalyst Property Services. They are based in Adelaide but service areas Australia Wide. Here's his contact details:
