Hey Everyone;
Firstly, I'd like to say hello to everyone, as I'm new to this website
I have a complication, which I am unsure how to get around, I would really appreciate it if someone could please help me out.
If I sell a block of land and make a decent amount of profit, it seems to me that capital gains wants to take some of that money away, something like 30%. Is there any way I can do anything to save that money from going into the tax mans pocket?
Thank You;
Hi
You have to pay it if you sell. Your capital gain is halved and it is added to your taxable income. Hence if your gain is say $100k then 50k is the additional taxable income. So if your current income is 50k then your taxable income becomes 100k. So the aim would be to lower your taxable income as much as possible in the year you sell. The only way to reduce your taxable income is to take time off with no pay, reduce your income by paying more into superannuation for a period of time (salary sacrifice) or sell another property in the same year that it is sold at a loss. You of course can buy another investment property in the same year and all those expenses including stamp duty (valid some States), repair work readying for it's rental, loss differential between interest rate against borrowing and rental income, rates etc also reduce your taxable income.
CarpeThe 50% discount relies on you holding an asset for at least 12 months from the enter into contract dates not the settlement dates.
If you own the land jointly with someone else then the gain is divided in half between the joint owners if the title is joint ownership.
You both pay tax but the gain is 1/2 and with 50% discount then the gain is 25% each.
Be careful of doing repair work to ready a property for rental as the actual repairs would not be claimable as a repair but rather through future depreciation.
This is due to you buying a house in a condition of needing repair and then repairing it. The Tax Law would classify the repair as an improvement. If the repair was the result of having rented out a property previously and having to repair the house due to wear and tear then this is a repair.
Under Tax Law the interest you paid on borrowings, Council Rates, Purchasing costs while holding the land would be considered holding costs.
These costs may be able to be added to the cost base of your land thus reducing the capital gain so long as you didn't claim any other deductions on your tax during the holding time (know as double dipping – you can only claim one way not both)
And you kept good records of these costsSee http://www.ato.gov.au/individuals/content.asp?doc=/content/36902.htm
P.S Welcome to the web site
Thank you all for helping me out, I really appreciate it
I don't have a problem minimising tax, But be sure you don't do anything to drastic to try and save tax,….
Remember if your making money you will pay tax, if you lose money you don't, I would rather earn a dollar and pay 30 cents tax than lose a dollar and save 30cents tax, I don't know any successful business that doesn't pay tax, Don't be afraid of tax, it is a by product of success.
Ok, thanks for the heads up.
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