We have invested in a set of 5 units and 2 sets of duplexes this year. Reading Steve’s latest book he says don’t be afraid to sell property in order to invest in something that will make you more money. My question is if you sell under 12 months you lose half in capital gains tax, is this the case if you reinvest as well. We were looking at improving the units and strata titling them to sell off. Each unit will owe us a maximum of $100,000, with a possibility of selling for a minimum of $135,000, giving a profit of $175,000. Do we wait until 12months is up or look at doing it in the next few months. Any suggestions from all you long time investors? Thanks Julie
julie edwards
Hi Julie,
Welcome to the forum!!!!
Do NOT sell under 12 months otherwise you will loose half in CGT, provided of course you can sell at all, in the current market. Things are slow, and many properties are taking on average 12+ weeks to even get a nibble, let alone sell.
Cheers, [biggrin]
Jo
Hi Julie,
Let me firstly say that I am not an accountant and as such you should check your options with your accountant before doing anything.
As Jo said anything sold within 12 months is liable for full CGT. You do need to be aware that the date of sale is not determined by the date contracts are exchanged but by the date the contracts are signed. There is a big difference and it can be costly if you ‘muck up’
Property is not considered an ‘active asset’ and as such you cannot defer CGT, as per the business model, on investment properties once a rental income has been received.
In terms of should you sell or not – I prefer to hang onto them unless, as Peter Spann says, you get an offer too good to refuse, you want to sell an underperformer and you have better places for your money.
For me the critical issue are your investment goals and to achieve this goal are you better off hanging onto or selling none, some or all of the properties.
Derek
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