I am about to put my IP on the market (block of 4 units). As I have $30k deductions for the tax year so far I am thinking that it is best to sell prior to the end of this tax year whereas I won’t have these deductions if I sell next year to reduce my income. I’m up for $175k in CGT, gulp!![cigar].
A client of my hairdresser told her that he rolled his CGT into his super and the ATO allowed it, I think he was pulling her leg, anyone know of this? or if there is anywhere I can roll my CGT which will benefit me ie transfer the gain to another IP??
thanks for your advice in advance.Hi lisa
Firstly your friend was pulling your leg as you are unable to roll over your CGT into Super. You are however under certain provisions able to sell your going concern business and roll over the funds into your Superanuation. To complex to outline here.
Before you put your property on the market there are many considerations to make:
1) Remember that CGT is calculated on the contract dates and not the settlement dates so you may need to check the original purchase date to see whether you qualify for the 50% reduction in CGT.
2) In what entity did you purchase the property. If it is in a Company name then no reduction will apply however you may not wish to distribute all of your profit from the company and keep retainined earnings for the following years.
3) I hate to say if the profit is $175K then it is likely you will be up for the highest marginal rate on this being 46.5% subject to other considerations.Do you have to sell? Why not use the increased equity to borrow against and create more wealth. That way you will pay NO CGT.
Many many things to thing about before listing it for sale.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
I agree with Richard, why not borrow the equity back by refinancing and use the funds for either more property or shares. Unless you’re going to use the fund to pay down personal debt I see no point in selling not to mention the commission & CGT payable.
AmandaBS
http://www.propertydivas.com.au
FREE online Property Resources“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”
Thanks for the responses, very thought provoking.
Approx 65% of my gross pay has been going into my negatively geared IP’s for the last two years (so able to claim the 50% CGT discount method). I am also paying off my own mortgage which is non tax deductible so I am wanting to pay off that mortgage and then start up again in a more tax effective way.
The gross profit is almost $800k (not bad for 2 years) so less expenses the CGT is around $175k. I other IP and had heard that you could transfer the CGT debt to that until that one was sold later down the track. I’m not sure how accurate that is tho’ (probably not).
My properties are in my own name, not a business entity.
would you recommend waiting until after June to sell so that I can place the CGT into a term deposit until the last date to lodge tax? mind you, then I’d need to claim the interest earned in my tax anyway.
Thanks again, my head hurts [blush2]Hello Lisabellan
Nice profit over 2 years. Congratulations. [smiling]
This is much too much money to make an uninformed decision about. I strongly suggest you go to a very good accountant who will be able to help you work out the best way to minimise your CGT.
Maybe your friend was talking about making a big deductible contribution to your super in the tax year that you sell in. I don’t know the super rules but think I read somewhere that after july 2007 you are able to make a 100% tax deductible contribute of up to $100K??? but I don’t know what the age or employment conditions are and I could be totally wrong. [blush2]
May I ask why your are selling all 4 units. Why don’t you just sell 1 or 2 if you really need to.
Cheers
Elkathanks Elka,
The units are on two seperate titles, each 1000sqm, and can’t be sold seperately.
I’m in the process of amalgamating the two blocks into one, which has just been approved by the WA Planning Commission, then I have to apply to have the 1 title split into 4. I’ve another 9 months to wait for the process to be complete. It seems a funny way to go about it however that’s what the shire in Geraldton said I had to do.
Rather than wait the required time I thought I’d sell now (subdivision still goes ahead with new owner), pay off my debt and then start again with a clean slate. that way I can also put some funds into my other IP to make it positive geared.
I think a visit to my accountant is a good idea, I’ll work on it.
thanks again for your advice
You must be logged in to reply to this topic. If you don't have an account, you can register here.
