Hi Folks,
Long time no speak. I have been out in the world buying property. I happy to say that in the last two months I have secured two more properties with returns well in excess of 10%. They are still out there.
I have decided to do a (my first) rent to buy. What I want to do is minimise my CGT. Can anyone help me with strategies that will minimise my liability? I think the CGT liable portion of the profit is about $30k. I am getting a cash on cash return in excess of 200% in the first year if it all goes to plan (not a typo – 200%)
Any help and advice would be appreciated – tips for new players especially.Thanks
Hi Jenwen,
you can get a 50% CGT discount if your option is exercised after 12 months!We buy properties in Adelaide. Immediate Cash Settlements, No Agent Fees.
[email protected]
phone 0412 437 582I beleive that the treatment would be based on the emerging profits basis. Eg if your Rent to Buy contract lasted for 30 years to earn that $30k profit then you would be taxed $1000 per year. Unfortunately the CGT discount doesn’t apply to this type of transaction
Thanks for that I will ensure that final sale takes one year or more.
cbellesini – are you saying that if the “income” is taxed by personal income tax therefore CGT is not applicable?This type of transaction is usually treated as ordinary income. To be eligible for the 50% discount you will have to hold on to the property 12 months before entering into the Rent to buy contract. As it is usually bought and sold quickly you will not be eligable. Don’t worry too much though here is a quick comparison.
Onselling the property straight away
30k at say 30% tax rate means this profit incurs $9k tax over the contract.Holdinf for 12 months 30k at 50% = $15k. Tax will be $4.5k however your carring costs in the first twelves months with interest etc may be $1,000 a month for example meaning you are out of pocket $16.5k as opposed to $9k
Just make sure you look at all the scenarios and your current situation to come up with what will get you the best profit.
Goodluck!!
Chris
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