Forum Replies Created
- Originally posted by eeshole:
Monopoly, why do you think I’m only 16? That’s probably my mental age, but I can tell you it’s been a looooooong time since I was remotely close to 16.Sometimes I wish I was 16 again.
Sorry eeshole, but you were the one who said it in one of your earlier posts, and there was no mention of it being your “mental age” hence the only other thing I could assume was that it was a reference to your chronological age!!!
Oh well there you go. Must be this forum, it seems to be attracting alot of 16 and 17 year olds (mentally at least) [biggrin]
Cheers,
Jo
Showbags,
I am sooooo glad you asked that question.[biggrin]
Just got off the phone to the Victorian SRO and I have been informed that transfers by “natural love and affection” are still permissable and do not incur costs here in Victoria; not sure about other states though.
It took me a minute because I was trying to remember the exact conveyancing term for it, and then fumbling through some documents I came across it, and rang up. Am thrilled to bits that I did too!!!
Here is a glossary definition of “natural love and affection”
In conveyancing terms, the term is generally used to refer to the reason or explanation for the transfer of land. Typically, it is an amount of money paid by the Transferee to the Transferor, but it may refer to some less tangible factor, such as the natural love and affection the Transferor bears towards the Transferee.
Also of interest to you may be:
http://www.rbt.treasury.gov.au/publications/paper4/part3/section6.htm#Heading37
I believe that it is still permissable HOWEVER it is done shortly following the sale of the property, it will raise a red flag with the ATO who may see it as a tax evasion exercise, so please be careful!!!
Good luck (and thank you) [biggrin]
Jo
Originally posted by showbags:Hi Simon,
You mention it will be a costly exercise, how so may I ask? As I understand it, there is no duties between property trasactions between spouse’s. All I thought I would need to do is transfer the title, extract the equity and borrow in my name the full amount. Then, I thought all expenses would be a deduction.
Sorry showbags,
That is an old rule, there is no more free transfer between spouses as there once was, it was phased out last year (not sure of exact date). Although I don’t know if this was nationally the case, but I know in Victoria, the transfer between spouses was no longer a simple matter.
Cheers,
Jo
Yack,
You asked me was there any legislation, I said I wasn’t sure but rather than blow it out my backside, I tried to do the right thing and posted a link re the Code of Practice for REAs as per the REIV, it clearly stipulates the use of signage; not my decision, nor my concern, but their practices!!!
Unlike you, I don’t have an aversion to them, I don’t consider them an eye-sore, and indeed as an investor, I enjoy seeing them on properties and thinking “ooh…I didn’t realise the house in X street was for sale, had I not driven by it” and once sold (on the assumption that I was not in the market to buy, and hence was ignorant of its sale) I can make a mental note to look up the sales in the area knowing that one has just recently been sold, enquire (under FOI) what it went for etc etc.
It’s all good knowledge to have, and I hardly think that just because it annoys you, it should be discontinued.
As for calling you childish, I make no apologies for that Yack, you have had your subtle digs at me before, and after throwing an educated response at you backed up by evidence, you suddenly went silent. What about some of the blatant nastiness in your remarks Yack, like my being “anti-problem solving” hardly fair after I had nominated alternative solutions to the posters dilemma. So don’t even try that one Yack, it don’t cut the mustard!!!
Maybe you shouldn’t stir up sleeping lions, then you won’t get bitten when they wake!!!
Cheers,
Jo
Thanks Simon,
My apologies showbags, I had overlooked a very important point, to which Simon has so kindly drawn me too, and that is the transfer of “bad debt” to “good debt” or non-deductible to deductible.
Cheers,
Jo
Here’s another:
If the shoe fits……..[blush2]
Besides Yack,
I’ll stop my “subjectivity” (I suggest you look up the word, as I am hardly being as you accuse me).
You directed your snideness at my comment, I obliged with an intelligent answer, and all you could come up with was “I don’t agree with free advertising, they’re an eye-sore” and a barrage of other childish excuses, when in fact, signage is there as part of a profession’s code of practice not merely to satisfy a small minority of people who are agreeable to them.
Hence, grow up Yack!!!
Showbags,
This will be a costly exercise, and quite frankly I don’t see the point.
You will be liable for stamp duty.
If you want to turn it into an IP that’s fine, why not just move out and rent it??? As your PPOR it is CGT exempt, and provided you do not buy another PPOR in the time that it is being rented, you can sell it within 6 years of it generating income without having to pay CGT.
Okay so the house is in HER name SOLELY??? Fine, let’s run with it…..you buy her out, pay the stamp duty, then what??? Borrow to buy YOUR (as in both of you) dream home??? Will you be buying it in JOINT names, if so, should you ever sell the old place only one of you will be CGT exempt. And what of the money to buy her out, will you be borrowing it in your name alone??? When you go to buy your new place together, the loan will need to be in joint names if it is to be jointly owned. You need to clarify some finer details before anyone can advise you adequately. This sounds very messy to me, and almost smells of tax evasion!!!
I am not sure I understand the motive behind this activity; on the surface it doesn’t look like the most financially viable option.
Cheers,
Jo
Pasandbec,
Sorry I am not a FHOG expert, people such as Woodsman and TerryW are, and as I can see they have addressed your concerns impeccably!![thumbsupanim]
BTW…if you want to speak to me without posting publicly you can do so by just selecting my username (by clicking on my name anywhere) then going to my profile, and sending me a message. Although I have no problem with public posting of questions marked to my attention, it’s just that some people who are equally (if not moreso) versed on certain matters may not reply thinking your post is for me exclusively.
Cheers,
Jo
Pasandbec,
Don’t be. The 6 month cross over is a period of time in which you are allowed to have more than one main residence. Often this is for people who say, sell their PPOR and are awaiting the settlement of their new PPOR, in which case they are technically claiming 2 PPORs.
Cheers,
Jo
Originally posted by Terryw:
Hi JoI was assuming that pasandbec would not be claiming the current main property as their main resdience for any overlapping ownership period.
Fair enough, Terry. Under those circumstances, yes you would have been spot on, especially mentioning the 6 month cross over period which in my haste, I omitted.
Many thanks,
Jo
Originally posted by pasandbec:
You obviously have alot of experience in this area
Sadly to the tune of almost 250,000 so yes I guess I have more than “a little” [blush2] knowledge of CGT.[bawl]
and I really appreciate you taking the time to help me.
You are MOST WELCOME!!! I do so hope that you can manage to repay the absolute minimum. [biggrin]Cheers,
Jo
Yack,
The sign is there for 30 days, after which time it must be removed, unless the agency obviously decides to do so beforehand.
As I posted before, try reading: http://www.reiv.com.au/_uploads/98_rulesOfPractice.pdf
It is part of the agents code of practice, so to that end, whether you or I like it or not, that’s just the way it is….MOVE ON!!! [offtopic]Originally posted by pasandbec:Thanks Jo! You’re a great help!
I did not get an evaluation done at the time I moved out of my Canberra property! Can I get one done NOW??? i.e can they back value it?
Yes you can, there are valuers specifically versed in this type of thing, especially for CGT purposes where people such as yourself (and I am guilty of it too, I had to have a couple backdated). Remember also, the cost of having this done is also associated with your cost base and needs to be deducted accordingly (approx. cost is $400-$600).
I thought the 50% partner thing was a little strange that way, it makes more sense now, thanks for clearing that up for me.
Yes again, sooooooo sorry, it was late, and I had to rush out!!! [blush2]Originally posted by Don and Liz:
Hi Jo,Has absolutely nothing to do with your mailing address. This history of this particular tax law was to make concession for public servants and others who were posted interstate and overseas for work. ie although they did not live in their old house there was no capital gains tax liability when it was sold. The reason being that you should not be punished for moving away for work etc.
And I agree, you shouldn’t be. This is partly correct, and I say PARTLY because yes you can move overseas on a working visa or transfer etc and not be penalised with CGT should you sell your property back home (no argument there)!! However, you are assumingly renting, staying with friends/family, company is paying for your accommodation etc whilst there; you are not claiming another place as your main residence (in the sense of OWNERSHIP) different ball game!!! If we are talking about being transferred for work overseas, then mailing address is not an issue, but that is not what is being inferred here. For the majority of people, the mailing address has a huge role to play in it. Check the ATO details as to what constitutes a “main residence” (in general terms).
.
As your sister will tell you the tax act (looking at a copy now) is 4 brick sized volumes.
And hurts like heck when it falls off your bookshelf and onto your foot, as mine has done on many occasions!!! [bawl]Almost every assest can incur a CGT liability unless it is exempt.
But not every asset is appreciating in value, therefore it stands to reason that they are exempt!!!http://www.ato.gov.au/individuals/content.asp?doc=/content/43486.htm&page=6#P615_59668
I understand the different between a collectable and a personal asset, but you need to keep in mind that MOST are not going to trigger a CGT event, however can be depreciated against an income generating asset ie. rental property.Things like collectable art, wine and cars also incur the liability.
Because as collectibles they are APPRECIATING assets. And although I collect shoes (that is I have a fetish for them) it doesn’t mean these will be subject to, or exempt from CGT!!!( Would have to be a very diligent taxpayer to declare realized capital value increases in some of these items.
And not a very wise one should you ever be audited, but then people will try on just about anything to make a claimable deduction, and I guess argued enough you MAY just get away with it. I’m not trying to be difficult here, all I saying is YES YOU’RE RIGHT to an extent but you need to differentiate between an appreciating and an depreciating asset, and their correlation to reducing the CGT event.
.
However, most CGT event relate to contracts and the assignment of property rights such as real estate.
Of course, ownership needs to be established. No seriously, this is very important but many people do not understand this.
.
Don’t take it the wrong way just trying to explain what I was getting at before. The items that are exempt probably won’t increase in capital value anyway.
And therein is your key!!!I am not taking it the wrong way at all. I personally just think that you need to be very very careful about the things you say in a public forum, that will give those not so clued up on their tax rights the wrong impression. Cars, household items are NOT CGT incurring items, they are DEPRECIATING/ABLE items that can be used to re-calculate the cost base in the event of a sale of a CGT (appreciating) asset.
Thank you for your explanation. I know now what you were referring to, but unfortunately your reference to these items will only confuse those who are not as versed in tax laws, and are here mainly to discuss PROPERTY. [blink]
Originally posted by pasandbec:Monopoly,
I spoke to my tax accountant and solicitor earlier today who said a couple of things. Could you confirm whether what they said is true (from your undersatnding of it).
My solicitor seemed to think that the CGT would only be calculated on the difference in the value of the property between the time that I first started renting it out to the time that I sell it.
Is this right?
Yes this is correct.
You will need to have a valuation done for the time you moved out to establish the property’s worth at that time.
My tax accountant said that the CGT would be proportioned to the period that it was actually rented for, i.e. I have owned it for 2.5 years and it’s been rented out for 1.5 years of that time, which equals about 60%. Therefore we only pay CGT on 60% of the capital gain.
Again he is right.So for example…
I brought my place for $196,000
It will sell for around $296,000
Profit of $100,000
Capital Gain = say about $85,000 (after expenses, etc)
50% discount reduces it to $42,500 (for owning/living in more than 12 months)60% of that is $25,500
Not at straight forward as this, as you need to know the value of the property at the time you moved out.divide by 2 (my partner’s half) equals $12,750
30% marginal tax rate (lower income) of $12,700 which equals $3,825 in CGT we have to pay???
I am terribly sorry, my mistake, I read your situation the other way round, that is I based this on your IP being in both names, and your new home in just one name (yours) therefore this deduction is not applicable.Here is a link that you can use to put in the figures you gave me to help you determine the amount you would probably have to pay. Please remember it is a guide only, and many other variables are not considered which can help reduce the amount.
http://www.cch.com.au/cgi-bin/cgt00isapi.dll/Based on the information you have given me, I worked it out as follows:
Your COST BASE which is the VALUE OF THE PROPERTY at the time you moved out (let’s say):
235,200 (a 20% gain in one year)296,000 Sale price
235,200 – Value at 2003
60,800 Gain
30,400 – 50% discount for 12mnth ownership
30,400 taxed at 30% (lowest tax bracket)9120 is your CGT bill (so far) ESTIMATED
Bear in mind, no costs have been deducted, medicare levy etc, so this figure will come down even further.CGT is not straight forward, but it is not as complicated as people make it out to be; the basics are not hard, it’s all the little deductions, conditions etc that confuse the issue. And me confusing your circumstance with YOUR NAME ONLY and JOINT NAMES didn’t help!!!
Sorry about the mix up!!! [blush2]
Cheers,
Jo
It’s worth a try!!
But it won’t really make much of a difference, you have 6 years in which you can rent a PPOR and still be CGT exempt, PROVIDED you do not claim another property as your PPOR.
At worst at least your partner is CGT exempt, and quarter of a bill is better than half right??? Don’t worry too much, the CGT for your partner only will probably not be very much, not since 2002 anyway.
Talk to a tax professional, he/she may find a loophole that I may have missed (I’m only human).
Sorry gotta head out, feel free to PM if you have any further questions: only too happy to help.
Good luck!!! [biggrin]
Cheers,
Jo
Hi pasandbec,
It is confusing, but unfortunately I can’t say the clarity of its impact has ever escaped me. Not only do I have a sister working with the ATO but I have paid more than $250,000 in CGT in my years of investing!!! So I am familiar with the “what does” and “what doesn’t” qualify for exemption. [blush2]
You don’t have to “nominate” a place as your PPOR as such, that is, you don’t fill in forms or shout it from a rooftop, but if your MAILING address (power, gas, phone) and say electoral role implies that you live at say your ORANGE property, then you have declared it as your place of residence, and although not directly common knowledge to the ATO, they do cross reference with the utilities providers, and bang….you’re found out!!! I am not saying you can’t do it, I’m just saying, if you do and you get caught, be prepared for a grilling.
Now in terms of (as I mentioned in my post to you) IF the original PPOR in Canberra was purchased in YOUR NAME ONLY and then your ORANGE property in joint names, then for you, you will not be CGT exempt (as you have a new PPOR, ie. the current address) HOWEVER….for your partner, provided he does not have another PPOR…his SHARE of the property (depending on the percentage, lets say 50%) will be CGT exempt. With me so far???
Say the CGT bill is 50,000 – 50% discount because you have owned it for more than a year.
Hence, 25,000
12,500 (your 50% share) needs to be added to your tax return, but….
Your partner will be exempt from paying 12,500.Hope this has helped.
Cheers,
Jo
P.S. Yes the ATO will cross reference with loan documents as well, so joint names on loans will flag them of PPOR purchases.
Originally posted by Don and Liz:
However, there are heaps of exemptions such as useds cars (unless its a business) household goods etc etc. As it is exempt then you don’t pay the tax.Don and Liz,
My sister is an ATO employee and this was never mentioned to me, can you please explain where you got this from??? [blink]
Cheers,
Jo
Originally posted by Terryw:I think you could get away without paying CGT this time, by claiming you last place as the main residence. But if you ever sell the current main residence, you could not claim it as your main residence from the date of purchase until you sold the investment. Can only have one main residence at one time – except for a 6 month cross over period.
How so Terry, if the current PPOR is the claimed main residence??? Had it (the current) not been the case, or less than 6 months (cross over) this may have been possible, but I cannot see HOW they can be exempt.
Cheers,
Jo
pasandbec,
Sorry, but if you have nominated your house bought in August 2004 as your PPOR you WILL have to pay CGT, of course you can try and get out of it, but I wouldn’t recommend it as the ATO can be heartless if you get caught.
Basically, if you were having your mail addressed to your 2004 PPOR that can be traced back, so if you try and tell the ATO otherwise and things like your old power bills, rates notices etc tell a different story, the ATO will not turn a blind eye.
Bottom line, YES YOU HAVE TO PAY CGT on the sale of your Canberra property, mainly because you did claim a new PPOR and you are only allowed one main residence at any given time.
If you have bought the 2002 property in your name only, and say the 2004 in joint names, your partner (provided he has no other PPOR) can claim the exemption for his share of the property.
Check the ATO website for more info, and ultimately seek professional accounting advice.
Cheers,
Jo
