Long story short – Husband sold an IP without finding out about the capital gains tax implication and after paying off debts and buying a PPOR, there was very little left over from the sale. Accountants (who have been incompetent in filing his tax returns for the last 14 years) have just informed us that we are up for possibly $120,000 CGT. Needless to say I am extremely extremely angry and disappointed.. but is there any help out there for the likes of us?
I would much prefer to look at solutions and ways to move forward from this point please.. many thanks for your interest and possible advice.
Astrawan
How long did you own the property? If it was more than 1 year, you are only up for tax on 50% of the gain.
Many accountants are not pro-active unfortunately; they sit back and wait for you to come to them with ideas etc. I'm surprised there has been problems for 14 years; didn't you say something?
Also, after you find a NEW accountant, ask them about a variation on the taxable income for this year. There may be nothing they can do, but a good sit down with them and go over everything is required.
Get ALL the finances in order and organised for when you go to see them and hopefully work out a plan of action.
Hi Marc
Thanks for your reply and yes the property has been owned for fourteen years and was sold for just over three times the purchase price.
The Accountants when they did the tax return for the history of ownership resulted in over payment of taxes every single year because they were incompetent and did not bother to find out the rightful facts that applied in this case. We did not know any better until someone else came along and alerted us to the problem.
I have been reading up on recommended financial planners and accountants and have sent off an email to Specialised Business Solutions to see if anything can be salvaged from the situation. Plus we need a competent Financial Planner and Accountant to go forward with.
Unfortunately, investment properties incur CGT when you sell them. There's nothing you can do about that. A capital gains bill of $120,000 suggests to me that you had a very healthy gain that wasn't subject to tax.
However, given the size of the tax bill and your unhappiness with your accountant I suggest that you should go and see another accountant promptly! I'm sure you will get some recommendations on this forum.
I don't mean to sound glib but it really is something you should get professional advice on. You never know, your accountants may have gotten it all wrong, which doesn't sound unlikely given their history.
Cheers
K
Quickly get a new accountant. You may also be able to amend the last 4 years tax returns if there are things you left out. tax returns older than 4 years can also be amended at the commissioners discretion too.
The financial year is not over yet, still 4 months to prepare. You need to reduce the income of the persons with the gain. Perhaps prepaying a year's worth of interest on another investment property – this will gave you are large deduction to help offset the gain.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thank you for your responses.
Linar, I know I know – I did not agree with selling the property but had to go along for other reasons. However, I asked that before he put it on the market, to find out exactly what the tax liabilities are and how to minismise it before the sale. Unfortunately, it didn't happen and it came as much of a shock to him as it was to his accountants (who were too busy to answer his enquiring emails in the months leading up to the sale).
Terry, I hear you and that is where I am at… trying to see the best way to salvage the situation after the horse has bolted! We do not have another investment property and are in the process of vetting accountants who can help us work out the best solution.
I was having a chat to a friend the other day and even though it is too late for this matter right now, a way forward in the future could be setting up a trust where the tax rate is set at only 30%, and somehow factoring in superannuation payments for the beneficiaries that will further minimise the tax… ??
Now I am all for setting up the right vehicle as after this wallop, I sure am keen to learn to do things properly next time.
Astrawan
Hi Astrawan
Trusts don't pay tax (unless the income is not distributed = top rate). They do allow you to distribute income to the lowest income earner(s) so you can save heaps. And as a last resort you can distribute to a company and cap the tax at 30%. But with a capital gain you can distribute it to individuals and they will receive the 50% discount (if the asset is held more than 12months) so the max rate with a trust for CGT should be 24.5% or less (have the rates dropped recently?).
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for the advice Terry, it will be one of the things we will ask the Accountant to help us set up for the future.
Gabriel, the search for a suitable accountant is well underway, but very interested in how do we go about "purchasing a fully financed government project in reneawable resources"
Astrawan
I want to now what happened to the Capital Stable Growth fund paying a guaranteed 15% per annum in Gabriels other post.
Dont tell me it is oversubscribed and I have missed that one.
Richard Taylor | Australia's leading private lender
Had a quick look at Gabriel's website at gnfinance, and have to admit that it did not inspire any confidence whatsoever into trying to find out more about his claims
.Astrawan
Dont worry if you have a close look at the website all the juicy bits are coming soon.
Richard Taylor | Australia's leading private lender
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