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)Wayne,
There are several figures/facts that need to be provided to work it out, such as, using your father as lowest income earner (assuming I guess that the title of land is in joint names?), the costs associated with the land ownership during the time they had it (eg. rates), selling costs (agent commission, advertising etc) and of course the cost when they bought same (stamp duty etc).
All of this needs to be factored in, and then if you use the calculator (as per the link I provided) it will give you a rough estimate of what the CGT will be.
Cheers,
Jo
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.auHere’s a link to the Capital Gains Tax estimator from the Your Mortgage magazine website:
http://www.yourmortgage.com.au/calculators/capital_gains_tax/
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