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  • Profile photo of Rob G.Rob G.
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    @rob-g.
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    July 15, 2014 - 7:03 pm
    Brizza wrote:

    So the beneficiary is assessed for the tax payable (which can be at high rates) but the trustee actually pays the tax on behalf of the child beneficiary?

    Minor beneficiary must submit a tax return if they are presently entitled to income of more than one trust, or if they have other income etc.

    Profile photo of Rob G.Rob G.
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    July 15, 2014 - 6:56 pm

    It appears that you are purchasing an IP (dwelling C) and are hoping to use it as an IP for a time and then demolish and rebuild within 4 years.

    Since property C is initially an IP, you will not be able to nominate this as a PPOR until you do in fact occupy it as your main residence.

    The 4 year build concession deems vacant land or an uninhabited dwelling to be a main residence under certain conditions.

    The 4 year build concession is where you purchase vacant land or a dwelling to build/renovate and occupy a PPOR as soon as practicable up to a limit of 4 years. Alternatively where you demolish and rebuild your existing PPOR you have up to 4 years without disturbing the main residence exemption.

    You need to get further advice on the suitability of your plan.

    • This reply was modified 10 years, 4 months ago by Profile photo of Rob G. Rob G..
    Profile photo of Rob G.Rob G.
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    July 15, 2014 - 6:45 pm

    Here is a hypothetical response.

    Clarifications needed.

    1) What is the trading entity (sole trader, company ?).

    2) Is just the business being sold, as opposed to a company that conducts the business ?

    3) If the business is being purchased (rather than a company conducting the business), has the purchaser also purchased the book debts ? Alternatively, has beneficial ownership of those debts remained with the vendor ?

    Profile photo of Rob G.Rob G.
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    May 26, 2014 - 9:05 am
    superAndrew wrote:

    Hi CRJ

    That’s what I thought initially but this example on the ATO website says otherwise.

    https://www.ato.gov.au/General/Property/Your-home/Buying-and-selling-your-home/Main-residence-exemption-from-capital-gains-tax/

    Andrew

    Inappropriate quote

    s.118-192 market value cost base deeming only applies for a dwelling that would have been a 100% exempt main residence prior to first using it to earn assessable income.

    The original post indicated that this dwelling was initially an IP

    Profile photo of Rob G.Rob G.
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    November 8, 2013 - 9:12 pm
    darkness72 wrote:

    Purchase an investment property at Auction, – lets say 600k

    I pay with my own funds (redrawing funds from my PPOR home loan) the Deposit – 10% 60k

    At settlement the bank investment loan commences for 600k – remaining 540k to the vendor.

    The other 60k the bank places back into my PPOR.

       If you redraw $60k from PPOR loan and use this to pay the deposit then that portion of PPOR loan interest is deductible. It is the order in which it is done that matters. PS This website editor does not work with Internet Explorer which is why I don't bother posting here any more.

    Profile photo of Rob G.Rob G.
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    November 2, 2013 - 4:17 am

    Which state ?

    Profile photo of Rob G.Rob G.
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    October 30, 2013 - 8:43 pm
    Ynchai wrote:
    Thank you so much for your replies. Really helpful.

    @terryw, i just read the tax case you referred to, it sounds like the interest on creating capital is not tax deductible, and construction could ve argue as capital creation even with intention to rent out the property so based on this case, it wont be tax deductible during construction. Am i reading the case correctly?

    You are probably only reading the AAT and Federal Court decisions.

    The appeal to the High Court was successful.

    I must say that the ATO website seems misleading in that it fails to emphasis the requirements of ongoing efforts to progress your project AT ALL TIMES.

    Mere intention is not enough. Yet most forum posts seem to proceed on this basis.

    Keep evidence of your ongoing activity. You don’t get an interest deduction for merely holding a property for future development.

    Profile photo of Rob G.Rob G.
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    September 29, 2013 - 12:44 pm

    CGT still matters because it is a tax on inflation.

    Even your dependents may inherit the property with your historical cost base and substantial underlying tax liability – AKA 'death taxes'. I seem to remember Terry trying to raise estate planning issues with you.

    Present value does matter with capital appreciating assets.

    What makes you think the 50% discount will remain … non-residents recently lost it.

    Basically, the ATO's equity will be increasing along with yours or your trust's.

    Streaming of capital gains through trusts is constantly being reviewed by government.

    Terry is clearly concerned about your seeming lack of instruction from the solicitor that sold you the trust deed, and your reliance upon the conveyancer's legal advice which might trigger double stamp duty upon changing the names on the contract if done incorrectly.

    Profile photo of Rob G.Rob G.
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    September 27, 2013 - 4:12 am

    From your stated facts:

    Valuation is at the first day it was rented for cost base

    This is the day it is deemed acquired by you for the purpose of tracing ownership and apportioning

    Profile photo of Rob G.Rob G.
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    September 22, 2013 - 7:35 am

    GST ?

    Loss of six year absence main residence CGT exemption.

    Sigh …

    Profile photo of Rob G.Rob G.
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    September 21, 2013 - 11:50 pm

    Doesn’t matter if you move into another dwelling you own.

    The s.118-145 election deems your vacated dwelling (and no other) to remain your exempt main residence for a certain time.

    Profile photo of Rob G.Rob G.
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    September 21, 2013 - 11:45 pm

    Instalments of capital from a deferred PPOR disposal would not be considered ordinary income for tax law, so maybe that swayed Centrelink.

    Renting is different.

    Not sure how Centrelink would treat this for assets test.

    Profile photo of Rob G.Rob G.
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    September 21, 2013 - 11:36 pm

    Sounds like capital based on the disclosed facts. 1) extent of replacement = entire external, 2) use of more durable non-rust copper to replace cast iron, 3) Possibly initial repair where the pipes were rusty or defective from the time purchased.

    Profile photo of Rob G.Rob G.
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    May 11, 2013 - 7:59 am

    Possibly zero deductions and zero income if it looks entirely motivated my domestic reasons.

    Profile photo of Rob G.Rob G.
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    May 4, 2013 - 9:58 am

    The valuation date is the day it was first used to produce income – this is the first element of cost. This is probably what your accountant was telling you.

    If you elect to disregard any capital gain by treating it as your main residence during your latest absence due to living in the new PPOR then you lose the exemption for this new residence for the overlap except perhaps 6 months.

    At least it saves the cost of getting a retrospective valuation done, but your new residence may have appreciated more than the old one.

    Its your call whether to elect.

    Cheers,

    Rob

    Profile photo of Rob G.Rob G.
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    May 3, 2013 - 8:30 am
    lizu wrote:
    Thanks for your comment, Terry. Up until the point I purchased the second residence, the old house was my home and only property … so I can't understand why the accountant is saying I need to treat it as an investment property from the time I first had a tenant in it.

    What can I do if my accountant still insists that he is right? Do I find another accountant, or can I instruct him to do as I think is right?

    Your accountant was probably saying that you will be deemed to have acquired the house at the date it was first used to produce income, using a market value cost base.

    If you didn't use the absence rule when initially vacated, and don't choose to apply it now, then you will have to apportion non-main residence days from that original deemed date.

    Cheers,

    Rob

    Profile photo of Rob G.Rob G.
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    March 29, 2013 - 12:57 am

    Generally, you get one main residence exemption, except perhaps for a 6 month overlap as Terry said.

    Take your details to another accountant to get an informed opinion.

    Cheers,

    Rob

    Profile photo of Rob G.Rob G.
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    February 26, 2013 - 9:14 pm

    The main residence exemption would normally require occupying as your main residence as soon as practicable.

    Cheers,

    Rob

    Profile photo of Rob G.Rob G.
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    December 7, 2012 - 12:46 pm
    theycallmeBruce wrote:

    But the only thing you can purchase in your SMSF that you can benefit from is artwork, you can purchase this and hang it in your own hallway provided that is the most logical and secure place for it. Anything else like this you can buy and benefit from?

    Another example of bad advice.

    Cheers,

    Rob

    Profile photo of Rob G.Rob G.
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    December 4, 2012 - 9:54 pm

    The key requirement is to be able to access the small business concessions in Division 328 ITAA97.

    The first requirement being that you carry on a business.

    An activity of renting a single holiday property appears to be mere passive investment income based on the facts you have given above.

    This is regardless of whether the asset is held personally.

    The ATO website has advice and rulings providing guidance on how to determine if an activity amounts to carrying on a business.

    Cheers,

    Rob

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