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Hi Brenda
Your accountant may be calculating it wrong. The calculation of CGT with regards to real estate is:
1. Work out your cost base (this is purchase price + legal fees + stamp duty, etc + capital works deductions). So yes, you do add back any capital or building write-offs as you have stated.
2. Deduct the cost base from the sale price. If you have made a profit then that is your total capital gain. This can then be reduced by 50% if owned for more than 12 months.
3. Now the important bit……if when deducting the cost base from the sale price, you have actually made a loss, then you need to recalculate your cost base. You do this by adding back any depreciation you have claimed on the property’s assets. This new cost base calculation is called the reduced cost base.
4. Once you determine your reduced cost base and subtract it from your sale price, if you have still made a loss then this is the figure you use on your tax return for carried forward losses (or apply it to any other gains you made). If you have made a profit though using the reduced cost base, then you have neither made a gain or a loss and no action is required.
I hope this helps and does not confuse you too much. You can look this up on the ATO website at:
Lisa
mmmm….we could go backwards and forwards here forever couldn’t we. As far as stating legislation goes, it’s basic tax law with regards to deductions, just go and read sec 8-1.
Now, the problem here is you are missing my point, and perhaps that’s my fault because I have not explained myself fully. The issue we have is this:
We get so many clients who give you a spreadsheet or receipts of items they wish to deduct. So, we ask them questions about specifics of the deductions and sometimes you will realise they are trying to claim things that they are not “legally” able to claim. Not because they are trying to scam the system, but because they “read it somewhere”, or “their friend claims it”. The problem with books like Dales is that people who think they are doing the right thing will start claiming their wine they drink for dinner each night because they can just tell the tax man that they bought it for their accountant. Obviously this is just a general example, but the point is, people who do not know the law read these books to learn what they can and cannot do. They are not trained tax professionals and take someone such as Dale’s word as gospel. Therefore, in writing a book such as this one, you really must be careful with your statements, and you must admit that Dale was really out there with regards to saying…..â€you can claim this and you can claim that….all because you have a trust setupâ€.
Gordon, you stated “I think most people of average intelligence would have assumed that some of the deductions listed are possibilities depending on your business and employment circumstances etcâ€. Thank you for that comment because it totally backs up my argument. When reading these types of books there is no room for assumption. The only assumption that the average joe should make after paying $100 for a book is that the information in there is correct. There must be cold hard facts because unfortunately not everyone will realise that there are other circumstances that need to be factored in, regardless of their intelligence level. Also, a lot of people do not realise that if they get audited and have claimed something they are not legally able to, it is them who will be penalised, NOT their accountant.
Finally, Gordon I take offence to your comment “it makes me wonder about the motives behind her postâ€. What do you possibly think I could get out of it !!??? I live on the opposite side of the country to Dale so it’s not like I’m trying to steal his clients…….and as I’ve already stated I am not a guru on trusts so it’s not like I’ll be writing a book and competing with him……
I have no motives other than to make people aware. This forum is for people to post their opinions, which I have done. People then choose whether to take it on board or not. End of story.
Sorry, I should have been more specific. Dale’s statements with regards to what you can claim as a deduction through a trust are where we have an issue. He is inferring that anyone can claim these items because they have a trust setup, but that is not the case.
I won’t comment on his advice with regards to hybrid trusts because as I previously stated, I am no expert in this field but am trying to learn it myself. But unfortunately, due to the “cowboy” attitude Dale has with regards to deductions, I won’t take anything on board from his book but will seek to confirm those rules and regulations through other means.Hi all, this is my first posting to the website and it is going to be controversial [ohno]
I really have to agree with stuck-at-two. I am a property investor and have been an accountant for the past 10 years. I have only been doing tax for the past 2 years (was previously commercial) and am trying to find out more information on different trust setups and the tax implications, just as you all are. So I bought Dale’s book. Well…… I passed it around our tax practice and everyone was horrified. His recommendations really do border on avoidance, and the use of “sex toys” as an example, whether a joke or not, was totally unprofessional. The worst thing about it is he is abusing his position. People who do not know tax take his advise as gospel. Now obviously I am far from an expert, but I would advise anyone who has read this book not to take his advice on board. If you do you may find yourself in a spot of bother if you ever get audited.
Thanks
Lisa
