Hi Guys and happy New Year
I have a couple of questions in regards to capital gains tax.
I would like to know how to best minimize the tax I pay when selling a property
Now for my Questions1: if I work full time and my partner is a full time student is there any advantage in buying IP’s in her name?
2: in the future if I was to leave my job to become a full time investor what rate would i pay capital gains tax at.?
3: if I setup a Business that buys Ip’s to add value and then sell the property within 1 year what would the rate of capital gains be?
I’m throwing around ideas in my head and I would like to know some facts about Tax Payable on the gains.
Thank you
Hi Native_Metal
1: if I work full time and my partner is a full time student is there any advantage in buying IP’s in her name?
Depending on your income, and what type of investment purchase, like eg. +ve geared vs -ve geared. It could vary who should own the property.
If its +ve best to put in your gfs name as she has a low income. If your a high income earner, and your after some tax breaks, go with the -ve. But again it will depend on the property and both your taxable income position.
2: in the future if I was to leave my job to become a full time investor what rate would i pay capital gains tax at.?
For a property trader, who soley relies on the profits from their investment properties, you might be able to avoid paying tax, though depending again. If you are a very aggressive and but very active property trader. Though you do lose out on your 50% capital gain discount, because your are a property trader.
3: if I setup a Business that buys Ip’s to add value and then sell the property within 1 year what would the rate of capital gains be?
As an individual you pay tax on 100% of the capital gain.
Not sure with Company if it is the same as one year, but you pay a 30% tax on every profit.
Trust – you can distribute, the profits to beneficeries, yet im +ve they will not be exempted from any capital gain tax discount.
Cheers,
s.i.sHi Native Metal, try this
http://www.ato.gov.au/individuals/content.asp?doc=/content/31570.htm&mnugood luck [}
]Lioudmila
Success comes in CANS, not Cannots
1: if I work full time and my partner is a full time student is there any advantage in buying IP’s in her name?
It depends on your long term strategy. I would consider setting up a family (discretionary) trust, as this gives you the option of who to distribute the income or CG to (if you sell). Far more options for down the track when circumstances may have changed beyond what you thought might happen.
2: in the future if I was to leave my job to become a full time investor what rate would i pay capital gains tax at.?
Your current marginal tax rate. If held <1 year, you halve the gain and add the remainder to your taxable income. See 1 above on how to minimise this.
3: if I setup a Business that buys Ip’s to add value and then sell the property within 1 year what would the rate of capital gains be?
Companies will pay tax at 30% – no CGT exemption for them. I would still consider doing this option within a trust – not the same trust as in 1, because you will be classed a ‘trader’ if you do this often, and you don’t want your entire portfolio classed as a trader.
Get some good advice from an accountant.[8D]
Cheers
Mel1) If the properties are postively geared better in partners name assuming not long term hold when partner may be in a higher tax bracket than you. Negatively geared may still be better in partners name if make good gains depends what bracket partner in when sell and whether half the gain exceeds negative gearing during period held. In otherwords you need to crunch the numbers if the property is negatively geared.
2) Assuming you hold the property for more than 12 months then half the gain would be taxed at your marginal rate depending on your total net taxable income for the year. Add Medicare levy as applicable to the following.
No tax on first $6,000
17% 6,001 to 21,600
30% 21,601 to 52,000
42% 52,001 to 62,500
47% Over 62,500
If do not hold the property for more than a year than all of the gain will be subject to the above.3) No entity qalifies for the CGT discount if property held for under 1 year. So you are looking at the relative tax rates of the holder of the property. Individuals as above discrtionary trust as above regarding the beneficiaries (fexability a bonus), companies 30% but no 50% CGT discount available if keep for over a year and you still have to get the money out of the company one day. Super funds 15%.
Niether Trusts or companies can distribute a loss. Discretionary trusts can effectively pass the 50% CGT discount down to beneficaries if property held for more than a year.If you send me your e-mail address I will send you a free copy of our CGT booklet and our Rental Property Booklet.
Hi Julian,
Nice Info, just be aware, as there are new taxable income figures now for this new financial year.
Cheers,
s.i.sThanks for all the input guys makes things a little clearer now
SIS,
Julia’s tax rates look like the latest, do you mean there may be changes in the pipeline (as I believe).
Dave
I would seriously look at setting up a discretionary trust for your properties.
ANd don’t forget the finance aspects. Getting a loan when you are not working is difficult and you will end up paying a premium on the interest rate.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Julia’s are the new ones though aren’t they SIS?
Cheers
MelNah Mel, i know you know the answer… your so close to 1000 post.
Cheers,
s.i.sTax rates 2003-04
Taxable income
Tax on this income
$0 – $6,000
Nil
$6,001 – $21,600
17c for each $1 over $6,000
$21,601 – $52,000
$2,652 plus 30c for each $1 over $21,600
$52,001 – $62,500
$11,772 plus 42c for each $1 over $52,000
Over $62,500
$16,182 plus 47c for each $1 over $62,500Same as Julia’s SIS!! yes, I’m very close. Not many to go now [
]. Especially if you keep posting like you are, and I feel I have to respond!!!Cheers
MelHi Mel
Well… i got no choice but to make it harder for you to respond then. Though your so close to 1000 post…
oh no i think you might have just got there.
dam! [
][:p][][][8]Cheers,
s.i.sSorry Guys and my apology, just checked the ATO website and i am wrong.
Thanks Mel
Anyway here is the link to the ATO website.
Cheers,
s.i.s
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