Forum Replies Created
Hi,
My understanding is that the Section 32 just needs to be available prior to the commencement of the auction.
The most likely explanations are:
– The vendor hasn't managed to get the contracts and section 32 completed by their lawyer yet; or
– The agent thinks that withholding the section 32 is good strategy.I suggest that you talk to the agent and ask them why it's not available and when it will be.
It's never a good idea to make bid at auction without having had an opportunity to properly review the contracts and section 32.
Hi,
The original post seems to say that the land on which the 2nd property has been constructed has been held since 1994 and there is overlap with the original main residence which has been held since 1992.The legislation is very clear that the main residence exemption can only be applied to one property at a time and that there is only a small amount of overlap that is allowable when moving from 1 to the other.
If you choose to apply the exemption to the 1st property such that it is fully exempt, then when selling the 2nd part of the gain will not qualify for the exemption and will be taxable.
As above, have a look at the ATO document that provide details on how to work this out.
I also suggest a read of the following that deals with land – which can only be exempt under the main residence after a dwelling is built (& moved into).
http://www.ato.gov.au/individuals/content.aspx?doc=/content/36890.htm
Hi Dellas,
You might want to have a look at the NAB residential property survey. They seem to be saying that demand for inner city low rise apartments and townhouses is strongest.
Obviously, you don't want to take this for gospel and be aware that they are talking about current demand which may not be in the same place as longer term demand.
Hi,
There is no time limit for living in a property to be able to claim the main residence exemption. You just need to be able to demonstrate that it was your main residence.
There will be an issue for claiming the full main residence exemption on the 2nd property as you can only have 1 at a time. When you sell it you will need to do an apportionment calculation to take account of the period of time you owned the land whilst the other property was your main residence.
I recommend reading the following:
The ATO are currently attacking scenarios where people are seeking to claim deductions for money borrowed to pay interest on investment loans.
Need to be careful on this front.
Refer:
http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~tr~basic~exact:::AND~2011%2Fd8~basic~exact&target=FA&style=java&sdocid=DXT/TD2011D8/NAT/ATO/00001&recStart=1&PiT=99991231235958&recnum=2&tot=2&pn=ALL:::ALLIf you can demonstrate that the interest is the same either way then you would appear to have a good argument that you are not engineering tax benefits.
However, it seems that if you are able to avoid the withdrawal and repayment scenario it would be better for your position. Can you just let the interest hit the account and eat up the re-draw without having a problem with your lender?
Let's get back to fundamentals. To determine the deductibility of interest we must look at the use to which the loaned funds were put.
In the case of a re-draw, this is technically a new borrowing. This borrowing is not put towards the acquisition of an asset that will produce assessable income. Ie using it to pay the monthly repayment is not the same as using it to buy a property.
This being the case, the interest relating to the re-draw amounts will not be tax deductible. You need to do an apportionment calculation to determine how much of the interest can be claimed and this is going to be messy.
What you propose at Q2 will exacerbate this problem.
Thanks Steve,
The concept of a reasonably arguable position still exists. It comes up when the treatment of an item is in dispute. If a taxpayer can demonstrate a reasonably arguable position they will not be penalised if the ATO finds against them. Notwithstanding, they will still have additional tax to pay and interest thereon.
Lack of adequate records does not involve a dispute with the ATO. It simply means that you can't meet your substantiation requirements to claim deduction and as such, those deductions will be denied. You may also be fined for failing to meet your record keeping requirements.
No way! A good compliance history may help you plead your case but it will not stop them going through you like a dose of the salts.
The consequences of having poor records can be catastrophic. Maintaining your records is a dull but essential job.
Hi,
Please get tax advice. My intial thoughts are that you would have a Capital Gains Tax issue here as a result of both the change in ownership proportions and the change from joint tenants to tenants in common.
Stamp duty issues may be able to be dealt with under an exemption for transfers between spouses. I would strongly recommend that you get a lawyer involved to assist/advise.
Hi,
Theoretically the vendor of a property is required to provide a statement containing the information necessary for you to work out your capital works deductions. There is no requirement re depreciable items.
It doesn't hurt to ask them for a report as suggested above. If they are not forthcoming then best get your own QS depreciation report.
See http://law.ato.gov.au/atolaw/view.htm?Docid=PSR/GA20061/NAT/ATO/00001&PiT=99991231235958
Hi,
From a tax perspective depreciation and capital works deductions are based on cost.
A QS report is simply a means of determining what cost is when a property is acquired and details are not available for depreciable items and capital works.
As such, it would not be possible to re-assess the cost of existing items with a new QS report. Further, the ATO would generally expect that any deductions for depreciable items and capital works acquired post settlement be based on the actual cost and not a QS report. Ie if you paid for them you should have the details of what the actual cost was.
As such, I think that obtaining a new QS report is not appropriate.
Hi,
Am I correct in understanding that this property is pre exisiting – ie you did not build it? If this is the case then I note the following.
Depreciation and capital works deductions are based on the cost of the items. Depreciable assets are based on the price that you have paid for them. Capital works are based on the original construction costs – theoretically, the vendor is required to provide this information.
Practically, a depreciation report is the way to go. It will provide you with the details for both depreciation and capital works deductions. These are generally quite cheap and without it you may be exposed to a bit more risk in an ATO audit scenario.
There are several providers of depreciation reports. I would be happy to recommend a few.
This style of arrangement seems to be modeled on the split loan facilities that were the subject of Hart's case back in 2004. In this context, it's not surprising that the ATO have taken this view.
The focus of the draft ruling is really the use of a line of credit to effectively capitalise interest. It seems that if you take this out of the equation then the ATO may not have an issue with an interest only investment loan along side a P&I home loan where the investment loan is secured by the principal residence. However, would like to have this explicitly in writing.
Hi,
If there is no additional consideration then should not be double duty.
It's quite common to purchase with a and/or nominee clause and then complete the acquisition with a non fixed trust.
Ashley.
