Forum Replies Created
- dannyde wrote:Thanks for the info. Currently we are actually renting and the lease is in her name only. I have allocated my PPOR to another property (land tax purposes) that i own. We are not buying anything, but I thought (was under the understanding) that if she was to move back into her property prior to 6 years and live there for another year then sell, it would be CGT free. However what if she does not move back there and sells it prior to 6 years of renting it out?
Ok. If you are renting, then yes, it can be CGT free, because she only has the one PPOR (the one being rented out).
She doesn't have to move back in prior to selling, as long as the property is sold within 6 years of being rented. If it is sold within 6 years, it would still be her main residence, and be CGT free.
Not necessarily.
Are you buying or renting your home?
If you are buying, and your partner is living with you in a domestic relationship (married or defacto), you can choose to have different main residences.
BUT, if you do, YOU would be up for a portion of CGT on your PPOR, as (I presume) you own more than 50% of the home. Your partner would also be up for a portion of CGT on their IP.
http://www.ato.gov.au/individuals/content.asp?doc=/content/36893.htm
From my reading of this info, your partner would be better off to call your home the PPOR for both of you, and then pay the portion of CGT from when the property first received income. This way, your home is 100% exempt.
elliotjl wrote:On this topic. My wife and I now both own property. She purchased 1 before we got married, lived in it for 12 months and has recently rented it out. Her property was purchased 18 months ago. And we are settling on a PPOR this week. Does this mean potentially we have access to 2 6 year exceptions from CGT, as the PPOR will be my first property ?No.
As you are buying a new PPOR, and you can only have one PPOR at a time. Also, a married couple can only access one main residence exemption; they can not have two PPOR's.
Your wife should get a valuation done on her property, because there would be no CGT up until she has a new PPOR. But there will be CGT from the time she has a new PPOR.
MichaelGG wrote:Hi Dan, Thanks for sharing. By using trust and company, there is the higher maintenance costs. Plus, no 50% capital gain discount entitled. No access to loss. Therefore, the reason that people using this structure is mainly to avoid risk? High income earner should buy couple negative gear investment under their name. And, they should buy positive gear property under trust to distribute revenue to other family member who has/have lower income.Just to clarify, if the company holds the property, and is taxed on the property, there is no 50% CGT discount.
But of the company holds the trust as trustee, the taxable entity is the trust, and the trust is eligible for the 50% discount, provided it distributes the capital gains to individuals.
Risk is a key issue, as well as the flexibility to distribute the profits to low earning individuals. If you have kids, or a partner who earns less, you can distribute the income in a way that lowers the total tax payable.
MichaelGG wrote:Boogz & Paul, Thanks for your reply. Boogz, I was thinking to use my company. But, I just found out it was not a good way to protect yourself. $1 company should be set up as the trustee. Cause it will control property but not own it. Correct me if I'm wrong. Paul, Would you mind to share more info to this kind of insurance (insurance company, cover, price etc.)? Thanks, MichaelGGThe trustee company should be a new, separate company from any others you control. What is the current company doing? If it's doing nothing, then it can be used, but if you are opertaing a business or some other type of investments, then you shouldn't use it to hold new assets.
The company WILL BE the legal owner of the property, as the trust is not a separate legal entity. The trustee is the legal entity, which in this case is the company.
You wouldn't hold the property in a company, as opposed to company as trustee, because a company does not receive the 50% capital gains tax discount.
Set up costs – For a company / trust structure, probably about $1000, give or take. You can do it yourself for less, but I wouldn't recommend this for your first one.
Ongoing costs – the company pays a $212 fee to ASIC every year, and your accounting costs will be slightly higher, as you need to have trust financials and a tax return prepared every year.
Also, if the trust is a discretionary (family) trust, you can not access negative gearing. The losses sit in the trust to be offset against future income. In your own name, the rental loss offsets your salary income.
Hi James,
You only need to register for GST if you are carrying on a business, and your turnover from that business exceeds $75,000. Also, turnover does not include any 'input taxed income', such as residential rents or interest.
If you are doing renovations to residential property, then generally you would not need to register for GST, and, from your example, there would be no need to remit any GST on the sale of the property.
According to the MFAA, the average life of a mortgage is 4 to 5 years.
mortgagedetective wrote:Thanks Terry,Another broker has provided me their book data ($b) in operation for 8 years which shows less than 0.05% of their book refinancing within that time. Of those that refinanced, the average life of loan was still closer to the 5 year mark, which means their moving average is more like 7.98 years and growing.
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HI Michael,
Your percentage figure of 0.05%. Is this correct? That means if this broker had 10,000 loans on their books, 5 have refinanced in eight years. Do you perhaps mean 5%?
keiko wrote:stately wrote:Hi Rebecca, I thought that if you sell property with in 12 months you are up for the full Capital Gains Tax but if you sell it after 12 months you are up for HALF the Capital Gains Tax. Thats my understanding. Cheersyes thats correct
but if you live in the house for more than 12 months then you pay no tax but if you rent the house and sell it after 12 months then you pay half
That's not quite correct. In this situation, the owner of the land would be up for some CGT when they sell, regardless of what they choose to do now.
Hi Rebecca,
Firstly, if the block is sold as is, you will be up for Capital Gains Tax on 50% of your gain. But all of your interest, council rates and land tax add to the cost base. So the capital gain will be reduced. (This is assuming it hasn't been deducted already, and seeing as it is a block of land, it probably hasn't)
ie: Purchase $310,000, holding costs $25000, interest, $120,000. Total cost base $455,000
Sold for $1,400,000. Capital gain $945,000, of which 50% is assessable.This would be your capital gain regardless of whether you sell now or decide to build your PPOR. (Of course, you don't pay any CGT until you sell)
Secondly, there is NO MINIMUM TIME for a house to be treated as your main residence, to qualify for the main residence exemption. It is a question of fact, so you must prove (if asked) that you lived there. You prove this by changing your drivers license address, connecting the phone, electricity, gas etc in your name.
ryan mclean wrote:Can you set up a discretionary trust with friends that are not relatives?Yes, you can, in most cases.
A discretionary trust deed lists who can be a beneficiary of the trust, and usually allows for a large amount of beneficiaries. I have seen one trust deed that lists a beneficiary can be 'anyone on the electoral roll'.
If the trust has made a family trust election, (because of prior year losses etc) then this limits the beneficiaries to certain family members of the 'test individual'. But if the trust is making profits and has no need to lodge an FTE, then the beneficiaries are only limited by the trust deed.
To clarify, if you rent your PPOR, you DO NOT qualify for the 6 month overlap provisions in the main residence exemption.
Benjamin Csikos wrote:You need a license to hunt down cashflow positive properties?Come on now. Anyone can spend their day surfing the internet and hunting through property websites, and then pass it to a friend. Why would you need a license for that?
Because he's charging 100 bucks a month!
You need the licence when you are charging people for a financial service. And I'm sure ASIC would see that a financial service is being provided. Otherwise, why would people pay $100 per month for something they could do themselves for free?
Hi Tambo,
It depends on where you will be living while your PPOR is being rented. Are you pourchasing a new PPOR to live in, or are you renting?
You can only have one PPOR at a time, so if you have bought a new PPOR, then you would be up for a small amount og CGT.
Get a valuation when it is ready to be rented, then your CGT is the difference between your sale price, less the valuation, less 50%.
If you are renting, there would be no CGT payable.
Terryw wrote:Hi DanWhats the diff between splitting and cloning?
Hi Terry,
Trust cloning is where a new trust is formed, which has the same trustee, beneficiaries and terms as the original trust. It is a 'clone' of the first trust. There used to be a trust cloning exemption, allowing for the transfer of assets from the original trust to the cloned trust free of CGT. This exemption has since been removed. (Probably because it was proving very popular)
Trust splitting is splitting the assets in a trust, and having a new trustee appointed over separate assets. ie, Trust A holds two properties. Trust B is set up, with Co B as trustee to hold property B. Both trusts still operate under the one trust deed, so there is no re-settlement.
It's not as flexible as trust cloning, but still an option where the owners want to transfer an asset out of a trust, without triggering CGT or stamp duty.
Terry's right, trust cloning no longer exempts the transfer of an asset for CGT purposes.
Trust splitting can be done transfer an asset without triggering CGT or stamp duty. If you are wanting to investigate this further, best to take your trust deed to a tax lawyer and have them set up the new trust.
Although after seeing the tax lawyers fees, it may be cheaper just to pay the CGT!
I would have a separate trustee. Why risk it? For $1000 (approx) you can have a separate company as trustee, reducing the risk of assets being seized.
It'll be interesting to see what the banks do. It wouldn't look good to rise rates by more than 25bps after some of the big 4 have posted increased profits.
Then again, it hasn't stopped them before…
House prices extend rally in to 2010.
Hi Mark,
I don't know how reliable that website is, as it seems to be promoting Roy McDonald, and linking to Roy McDonald's websites.
Read this thread, especially down the bottom.
