Hi all,
This little pearler came to my inbox from ‘Money’ website this morning – thought you might be interested in the figures.
“Selling Property
Is there Capital Gains Tax on little profit?
Q.
I bought a cheap property in 1996 for $25,000 and rented it out for 12 months. I then sold it to the tenant by means of a rental purchase agreement which finishes this month. I sold the house for the same price I paid and made a bit over $4000 in interest. Will I have to pay any capital gains tax on this and if so how much?A.
Talk to your accountant because it depends on the wording of the agreement. However, it would seem that if you did not make a profit there can be no CGT but the interest should be included on your tax return.PS The answer is largely a side issue.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
$25,000 for a property – wouldnt that be nice these days…??[biggrin]
Keep Happy
You still get the odd $35000 house for sale in the trading post in Vic.
Derek,
Oooh, imagine that sinking feeling in your gut as you realised you wrapped a property for $4000 interest while the capital gain value was jackpotting.(I assume at 2% above his own interest rate which would be $500 per year)Still, at 80% LVR, the property would only have cost $5200 deposit plus closing costs of $1300. 10% return is better than a term deposit. And if he received a deposit or FHOG of say $7000 initially. He effectively would have been paid to set up a no money down deal that returns $500 per year. Say it took a total of 1 week of his time to set up deal, he has effectively made $500 per year for 8 years with no money down. If he did this 52 times a year, that would be $26000 a year for 8 years passive income. If he continued to do this up until today 2004, he should have $208,000 (without compounding profits back into investments)a year income now and for the next 8 years ( if they were all identical or better deals). He would have made a shitload
So compare a full time job negative gearing one big property after 8 years and the tidy capital gain of say $150000….
….compared to $208000 a year passive income for the next 8 years passive.I think it is a good deal if it makes money in the end. How much you make determines how good it is though.[cool4]
Good example
Live, Learn and GrowLifexperience
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