Hi All,
My question concerns Capital Gains Tax on two IP I own.
I purchase the original home/land for $210000 in 2003, demolished and build two duplexes on the site. Cost of buildings was 250000 + say $50000 for demolition, cost, etc. Total 250000+210000+50000 = $510000 for both propertied. I have one investment loan on both propertied owing $388000, the value of each duplex is approximately $400000. My question is if I sell one of the duplexes and pay out the outstanding amount on the investment loan will I be hit with Capital Gains Tax?
Thanks
MYes it will be looked at as 50/50 deal so you will be looking at paying tax on the profit of that property you sell.
Will you pay capital gains tax?
That depends on how long you have had the property since it has been developed, you may have to pay normal tax rates if the property you sell has not been retented out. If this sounds a little confuseing give me a call on 0408 355 568 and I will let you know what happened to me in a simular situation.Kind regards Rick
Monopoly, my favourite game
Hi Micasa,
Yes you will pay CGT as CG is levied on any investment that makes a profit.
I recommend you download a copy of the CGT Guide from the ATO website as there are a couple of examples therein that explain some of the issues associated with CGT under the circumstances given.
If you have trouble locating or downloading the file drop me an amil and I’ll send you a copy.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958CGT is also applicable to your income and personal tax levels for the FY isn’t it?
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi Redwing,
The taxable gain is included on your EOY tax returns and taxed according to the relevant scales. As such it is wise to sell in a no or low income year if possible.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958If the 2 end properties are different sizes, who gets to decide how the costs, etc are divided for calculating CGT?
Can the owner arbitrarily decide what cost went where and effectively delay some of the CGT by putting more of the costs to the first sold property?
Would it be better to get valuation/appraisal done at the time of sale to divide costs based on the relative values?
Thank all, I guess the tax man always gets his share in the end!
Costs are apportioned on the sq metreage area of the individual dwellings as a percentage against the total land area for CGT purposes
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
Thanks for that, Richard.
Next silly question – what if there are additional features such as views which which only one of the properties gets after construction? Adds value to one of the subdivided blocks but not all? Is this ignored in calculating the cost base?
No not at all.
You can used a weighted arguement and apportion a higher value to one block over another for just that reason.
Recently did a battleaxe block just like that where the back house had view and it was a steep incline.
We took photos of before and after and made a good submission to the ATO on just that point. They listened and agreed.
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
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