In America, I know you can do the following, but I’m interested to know if it is possible in Australia.
If you have an investment property and sell it after a few years and make a capital gain on it… is it possible to purchase another investment property and basically “delay” or rollover your capital gain into that property. This means you wouldn’t pay that capital gain until you sold that property at a later date.
Does anyone know whether this is possible or not in Australia? If it is, do you know the tax reference number that discusses this?
Thanks
HelenHi Daisygirl,
Not an accountant but as far as I am aware the option of deferring capital gains only applies to business operators who may sell one business and then buy into another.
Seek advice more expert than mine.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
In Australia if you have a Gapital Gains Event it must be applied to your income in that year it happened.
ChrisAll post are IMHO.
I too am not qualified but here goes and I posted this on another topic earlier this evening,
Capital gains tax can be deferred in some instances. Business, death, theft or loss/destruction etc see accoutant
Gains is applicaable in year of gain and tax income year.
Capital gains offset with Capital losses.elves
” a blind man may see what a sighted man may not”
My notes:
Can cgt be deferred?
yes in certain circumstances it is called a roll over.
Business reorganisation where beneficial ownership is maintained
The xfer of assets between spouses in family court order
Involuntary disposals such as compulsory acquisition , theft or destruction’
Death
From 10 dec 99 certain investments in companies and trusts exchanged eg takeover, for shares or units may be treated as a roll over.” a blind man may see what a sighted man may not”
Hi Elves,
I still don’t believe that under normal circumstances capital gains in property can be deferred by your ‘Joe Average’ property investor.
Typically property is not normally considered a business and any business advantages with CGT deferral do not apply to property.
I assume – if property is your business – there may be some grounds.
But as I said at the outset – no accountancy degree – the closest being a year 12 leaving pass in economics, but still having troubles balancing the cheque book.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by DaisyGirl:If you have an investment property and sell it after a few years and make a capital gain on it… is it possible to purchase another investment property and basically “delay” or rollover your capital gain into that property. This means you wouldn’t pay that capital gain until you sold that property at a later date.
Hey Elves,
Nice notes but ……
In the context of the original question largely irrelevant – the question asked about deferring capital gain from one property to another.
In Australia for the ‘typical’ (with as I said earlier possible exceptions for people in the ‘business’ of property) property investor this is not possible as the purchase and sale of property triggers a capital gains event.
Sure you can offset the losses from one asset with the gains in another but this is a different issue than the one asked by Helen.
I guess we’ll have to agree to disagree [biggrin]
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
I WISH !!!!!!!!!! [blink]
Hey there DaisyGirl,
If you find a way to “deferr” CGT please please let me know ASAP; I am about to hand over a huge amount to the taxman in the next month or so! [glum][glum2] LOL
Cheers,
JO
Hi Monopoly,
if you cant defer, find ways to minimise your CGT.
Cheers,
sisHi SIS,
I have done the best I could; the bill was originally much higher, and my tax agent managed to reduce it a further 25,000 more than my accountant whom I was paying 3 x more to to do the same thing !!! LOL
Cheers
Jo
Hi Elves,
Hmmmmmmmmm
OK, I did as you suggested and have spent a little time researching the matter of CGT deferment as it relates to the question originally asked without any clouding of the issue with reference to shares, collectables, previous postings and so on.
Initially I read the following ATO guide that covers a great many issues surrounding CGT http://www.ato.gov.au/distributor.asp?doc=/content/31570.htm
I read through the above document to find out what CGT deferral options are available to individuals. Of all the listed exemptions not one applies to the scenario originally asked by ‘Daisygirl’ – sure some less common events are eligible for deferral but still no mention of a buy and sale of a property.I then decided to follow the small business lead and read the small business specific document http://www.ato.gov.au/content/downloads/n8384CGT.pdf and found a very useful definition which defined assets as either being active or passive. The upshot of this is that active assets are eligible for CGT rollover and passive assets are not.
The same document specifically talks about rental property, and I quote “However, certain CGT assets can’t be active assets, even if they are used, or held ready for use, in the course of carrying on a business, for example, loans bonds, share options and assets whose main use is to derive rent” which is one of the primary reasons for owning investment property – by extension this means investment properties are not active and therefore not eligible for CGT deferral.
A search on ‘Active Assets’ as defined in the ATO’s legal database revealed a section 152-40 which defines an ‘active asset.’ Once again specific mention also specifically refers to a rental property as not being an active asset and therefore ineligible for any form of CGT deferral.
http://law.ato.gov.au/atolaw/view.htm?find=%22active%20assets%22&docid=PAC/19970038/152-40
But I digress as the original question specifically asked about residential property and rollover opportunities available there and not about small businesses. (In saying that it would seem that even small businesses have limited opportunity to defer CGT incurred with investment properties.)
I then searched the Somersoft forum when I dropped in for some chat time earlier this evening and did a search on ‘deferring CGT’ and up comes the following thread http://www.somersoft.com/forums/showthread.php?t=5327&highlight=deferring+CGT
Dale Gatherum Goss is a highly regarded tax accountant who specialises in property investment matters and is also the author of two books; Tax Battles and Trust Magic.
It would seem that in the context of the original question CGT cannot be deferred. Notwithstanding the above a tax payer still has capacity to offset gains with losses in accordance with the relevant section of the Tax Act.
Derek
[email protected]Edit – repositioned end quotation mark 5th para.
Property Investment Support Available. Ongoing and never stopping. PM welcome.
Monopoly,
I think setting up a trust with a corporate trustee helps mimimise CGTBut take that with a grain of salt, I’m just happy using BIG words
WF[buz2]
Maybe so Wallflower,
I am ignorant of such things, but I would guess they are costly to set up, and in the end, may not safe a great deal. I can’t really say.
Oh well, will just have to grin and face the taxman head on [wha]
Jo
Originally posted by elves:For your additional benefit, the writer asked me for additional info, I posted to the thread for others to see, and benefit from, besides, it was about CGT.
Hi Elves
I REALLY do appreciate the information and the trouble you took to post additional stuff. Having read all your text, I did pick up other bits and pieces that were very interesting to me and I’ve filed them in the back of my head for future reference. Having people provide info like you did is how we all learn what rules and laws are out there etc.
I am going to talk to THE accountant who says that you can do this so I can get it straight from the horse’s mouth. They stated to a relative that it was a fairly new law – but my thought is that if it is a new law that has just come in, it would have been on the news and the front page of every newspaper.
So I’ll find out what the story is – I just wanted to know from you guys if anyone had heard of it.
Thank you also to everyone else’s input and opinion on this….
DaisyGirl
Daisygirl,
In the past a lot of investors tried afforestation, films, crustations etc. which had high tax deductibility on them to offset their CGT. A lot of people lost their money as these schemes were speculative, if they were a viable proposition then the banks would have lent against them. However, there is one this year I would recommend that has a tax ruling on it and one I am investing in myself, only as little as I can get away with. My thoughts are, why pay tax when I can put it into an investment and if the investment goes under, well so be it. I have no connection with this firm other than putting $25K in it before 30th June. If you want some info email me and I will give you their number for a prospectus. It is a 8-12 year investment and is afforestation based. PLEASE do your own Diligence.
Spider
The ATO do run audits
They do target certain sectors of the community.
They are cracking down on certain measures involving “tax minimisation”Tax avoidance, tax minimisation, tax min schemes – one is illegal, one is immoral, one is likely to be shut down. The tax office is very much against dodgy schemes that offer lucrative tax offsets. ANd the perosn who pays? YOU. Not your tax agent, not the dodgy scheme, tax is your repsonsibility. Now having said that, there are many legit claims that are allowable.
If you are an investor, and you own property, are you not in business? Business of making money? Running or operating a small business?
YOu may be told that you keep records for 5 years.
You may have once been told it was 7 years.
You may also have been told, that they can audit you for 10 years, records or not! So I have been told.Elves
” a blind man may see what a sighted man may not”
Only way to defer CGT as I see it is to do your tax return and hand it in on October 30th – get the full three months extra use of the money!!!!! Honestly – our government really does like to tax and hit the good old humble property investor don’t they – CGT, new stamp duties in NSW. Makes you wonder why we invest in Oz, take money O/S instead. Though I digress…..
CastleDreamer
Castledreamer,
Why October??? If you had a tax agent/accountant do you tax for you the previous financial year, you have until 30th April (the following year) to lodge your return….hence you have 9 months!!!! Damn, if you were a woman, you could give birth in that time…LOL (no offense if you are male, just kidding around)
Jo
Don’t know where I heard the October figure – is that for private lodging???? But if I can leave it until April 30 then girl I am there – will consult my accountant. Cheers for that little bit of choice info!!!!!
CD
CastleDreamer
Quote from ATO website:
“Lodging your tax return after 31 October 2003A failure to lodge on time penalty can apply when returns are lodged late. You could reduce the size of any penalty due by lodging your return sooner rather than later.”
This is reference last year, but you can see the date is end of october – perhaps an accountant can get an extension as they have many returns to do – I will be checking!![computer]
CastleDreamer
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