Hello forumites,
I pose this question to them in the know..
We're about to settle on the sale of our first IP. Details are;profit (before bank reimburse and fees/charges) = $27k.
profit (after bank reimburse and fees/charges) approx 11.3k.
Property was bought in both names.
My income = 45k, partners = 42k.We also have a 2nd IP, currently running at a loss of approx 2.5k p.a.
Any educated, sensible opinions will be appreciated.
PaulHello Paul
I'm not actually sure what your question is. From your topic heading I assume (yes, yes I know
) that your asking how much CGT you will be up for and is there any way to minimise it?I don't quite know how you came up with your profit figures but CG is calculated on the sale price minus sales costs (agent fees, bank fees, sales tax if applicable, settling costs etc.,) less
cost base which is made up of original purchase price plus some buying costs (e.g. stamp duty) plus any capital works (renos) minus any depreciation claimed over the years.
This is by no means a complete list but gives you the idea that your accountant will be better able to tell you your real CG for tax purposes. You may want to read up on the subject on the ATO site.
http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/026&mfp=001&mnu=5060#001_002_026
As far as minimising your tax is concerned there is nothing much you can do as far as distribution goes as, if you own it 50/50 with your partner, the profit will be distributed in the same way. You then add the profit from the sale to your other income and are just taxed normally on the whole amount. The only thing that may be possible is to reduce the other portion of your taxable income for that year. Again, talk to your accountant.
You might also like to talk to your accountant about discretionary trusts before you buy any more IP's if he is versed in this area otherwise find someone who is.I'm not sure I qualify as either educated or sensible but I hope this helps.
Elka
Hi Paul,
Capital Gains Tax (CGT) is the tax paid on any Net Capital Gain made on an asset that is sold, and is included in your Income Tax Return. As Elka has explained a 50% discount on assets held at least 12 months is applied to the Net Capital Gain. CGT is not a separate tax but forms part of your income tax payable. For 2007 taxable incomes $25000 – $75000 the CGT is payable at a rate of 31.5%, up to a maximum of 48.5%.
I'd suggest you also have a chat to your Accountant.
) that your asking how much CGT you will be up for and is there any way to minimise it?
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