Benny wrote:

Hi Cris, Keep in mind that many times the seller may not need to pay ANY CGT. Main one is if they are selling you their PPOR. It is probably important that you know just how a sale affects the seller, so you can create a deal that they can say “Yes” to, eh?

Hi Benny

thanks for the information and the tips! btw, what is PPOR mentioned above means? sorry if it is a basic question as i m new to these things… And how does this PPOR works exactly to keep the seller not paying ANY CGT?

Benny wrote:

Re CGT and its calculation, you are right in that the total profit is taxed appropriately depending on the seller, and will often be less than 25% of the total profit gained (based on the 50% discount if owned longer than 12 months, and then taxed at the seller’s Marginal Tax Rate). So, the amount paid could be quite different for each seller.
Good luck with your hunting down of the information you need,
Benny

Then my next question here is, the calculation of CGT.

R u saying with my example above, the actual CGT that the seller will be paying after 5 years lease finished if i end up buying the property at $400K (the initial cost of the property is $300K for the seller), and if my monthly rent is $500.

he will be paying CGT of:

$400K-$300K – $500 x 60 months = $70,000 (subject to CGT of 12.5%, as 50% discount of CGT after 12 months, and initial CGT is 25% of capital gain)

So $70,000 x 12.5% = $8,750 will be paid as CGT in this case?

is my caculation correct ? pls correct me if any number is wrong here… I need numbers to throughly understand ur theory…

thanks heaps Benny

Cris

hi Terry

thanks a lot for your information. so u will b able to assist me in Tax then in the area of lease option? for example how am i going to structure the deal in the best way to avoid a big tax bill within the law ? or should i form a trust or any legal entities to these deal instead… will you be able to help me on those? R u based in Melbourne?

Cris

hi huilo

thanks for your reply. As for the first question’s answer, when u mentioned saving a deposit then show to a bank to get the finance, and assume that only 2nd tier banks would allow this as deposit, the deposit that u mention here do u mean the premium rent that the seller asked for from the rent to buy tenants? lets say a 5 year lease option on a $500K house, usually they will ask for a premium rent of maybe 5 or 10% of the sale price say $25,000 before the rent to buy tenants to move in? so do u mean when i paid the $25,000 as the premium rent to the seller, can this be a proof of the deposit to show to the bank to get traditional finance or do i still need to have extra savings in my account in order to get the finance approved?

and as for 2nd question, a caveat registration for restricting the vendor to sell/refinance the property, the not allowing the vendor to refinance is understood. but as for the selling part, isn’t the lease option already means that the seller has to sell to me within the lease period? if i put a caveat to restrict the vendor to sell as well, is it overlapping or is it also an important component as well? for i m new to this n i don’t understand how this lease option is working. thanks a lot again for answering Huilo.

Cris

• This reply was modified 8 years, 7 months ago by  Cris.