Hi All,
Hope you all had a great Xmas!
I was speaking with my dad over the Xmas break and he asked me about the capital gains he would have to pay on a block they have down in Denmark, WA when they sell it. I wasn’t quite sure on this one so I thought I would post it and see if anyone could give me an answer.
Here’s my parent’s scenario:
They purchased the block for $74,000 a couple of years ago (purchased it out right).
They are now selling it for $176,000.
My mum is on 34,000 a year and my dad is unemployed, however he still receives a RAF pension of $130 a week.
If they sold it for $176,000 (profit of $102k) how much would they lose in tax?
Will they be able to write off the agent selling fees and stamp duty when they purchased the block?
Thanks for your help!
Cheers
Wayne
Wayne Leech
*Below are links to my websites – any feedback, comments would be appreciated:)
http://www.landsearcher.com.au – List your land for FREE (Private sellers only)
http://www.homesearcher.com.au – List your property for FREE (Private sellers only)Hi Wayne,
There are several CGT calculators available, but one that I found to be fairly basic and easy to understand (as some are real [wacko]doosies):
http://www.cch.com.au/cgi-bin/cgt00isapi.dll/
It’s mainly used to find the best method to use (that is, the cheapest or least amount to pay).
Cheers,
Jo
P.S. Do bear in mind, this calculator is only a GUIDE and proper accounting/taxation advice is recommended.
If the property hasn’t been used for income-producing purposes, non-capital costs of ownership such as council rates can also be included in calculating the cost base.
Selling costs and purchase coss are also taken into account in calculating the taxable gain
Wayne,
Your cost base is made up of buying costs such as stamp duty and selling costs such as commission plus holding costs such as rates. Travel costs cannot be included in any of these.
The capital gain is the difference between the selling price and the cost base. You can deduct from this any capital losses on other assets then half it for the 50% CGT discount.
Assuming the property is in joint names and the difference between the selling price and the cost base is $90,000 the taxable amount would be $45,000 if you have no other capital losses. That is $22,500 to each of your parents. Your mother would pay 31.5% on this ie $7,087. Your father would pay 18.5% on the first $14,840 and 31.5% on the rest. His total tax would be $5,158. Your parents’ combined total tax would be $12,245.
If you think this is too much your father could consider making a contribution to super and your mother could salary sacrifice her wage into super. The super contributions would be taxed at 15% in the superfund’s hands but this is still better than their marginal tax rates.Julia Hartman
[email protected]
http://www.banacs.com.auThe Cg Tax will depend on how the structure of the property is split. Is it a 50/50 share.
If so add half of the profit to both incomes, then minus all capital deductions such as stamp duty, agents commission and any others. Minus all property related deductions.
The CG Tax is at the marginal rate. However to give you the maximum CG Tax take 27% of the profit and that will be the maximum of course this percentage is mainly for top income earners. You should consult and accountant, is this income going to effect any pension
Julia’s post nicely estimates the CGT. As you can see it doesn’t really work out to be that much. But I suppose it is still best to minimise it as much as they can.
However, your dad should be asking how this will affect his pension as well.
Terryw
Discover Home Loans
Mortgage Broker
Click below to email meTerryw | 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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
