Hi everybody!
I bought an investment property (house) 4 years ago for $196K. These days it’s worth around $390K. My wife and I currently live in a fully owned unit and would like to sell the house in next year or two. Ofcourse, CGT is payable on nearly $200K. This means that my tax bill could be around $50K.
In order to avoid or reduce this, I was thinking along these lines: “Sell” the property to myself for, let’s say, $200K, which would attract some stamp duty and other fees, live in it for a year as a primary place of residence. Sell it after that one year and not pay CGT, because we lived in it.
Would this work? Is it legal? Opinions and suggestions please !Thanks
Hi,
Selling it to yourself, living in it for one year and then selling it again sounds a lot like a scheme to avoid tax and you would likely fall foul of the taxmans green audit pen IF you were caught.
The way around this is to mount a reasonable argument for why you had to move into the property and then why you decided to sell after a year. If you could do this then you might get away with it.
The other option, which avoids CGT, is to just access your equity by refinancing your loan. The downside of this is that you have more debt (higher risk) and have to pay interest.
Finally, remember that there is a CGT discount of 50% provided the end taxpayer is an individual. I think that if you make money you should expect to pay tax – just so long as it is as low as possible.
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
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Hi!
Micheal & Kaye / Steve,
Thank you fo replying to my question. Your expert replies have promted some more questions. I actually want to clarify that I understand what you are saying.###
Michael & Kaye, you mentioned PPOR. If I understand correctly, the maximum exemption part on CGT is reached after 6 years of IP ownership? Why does your calculation say: “730 / 2190 = 0.33 (or simply, 2yrs / 6 yrs)” Where do those two yrs come from?
Let’s work out this scenario: The IP is in my name only. Purchased 4 yrs and 4 mths ago. If I sell it in two years, what’s my tax bill ?###
Steve, you metioned “accessing equity to refinance the loan”. I don’t fully understand this. Can you simplify this for me?Dear people, I’m sorry to bother you with these extra questions.
Thanks.
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