Hi all,
Ive got a slight problem. I have an investment property that I want to sell, but the CGT will be astranomical!
I bought for $179,000 in 1998, and now its valued at $1,400,000. Margaret River, WA, 6285.
My question is…can I claim the interest only repayments on a vacant special rural property of 4.8acres.
It hasnt been used to produce any income, and nothing, ie interest etc, has ever been claimed before.
Any clues or ideas on how to possibly reduce the CGT will be wickedly appreciated!!!!!Cheers…
Jim
Hey Jim,
Sounds like a golden goose deal. Well done.
You would be best to see an accountant here, but I think that provided you bought the property as an investment with a goal of making a profit then the fact that it has gone up so much in value provides a reasonable argument for claiming the interest on a loan used to buy that investment property.
As for reducing the CGT, well, provided you are structured properly then you should only have to pay tax at your marginal rate at 50% of the gain. Definitely go and see an accoutnant for some tax planning though to see if you can take advantage of any rural allowances (don't know if there are any, but worth a try).
Well done again on your deal!
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Jim,
what a fantastic problem to have
……….phenominal growth As with Steve's advice above, you need to see your accountant and with the numbers involved here, I would also seek a second opinion.By the way, I wouldn't just claim the interest. You should be looking at deducting all the holding costs off the profit (such as council rates, land tax, water rates, etc., etc.) Also ensure you have all your purchase items (expenses) to add to the cost base.
Let us all know how you go with the accountant(s) opinion.
Hi Jim, nice problem. Not sure if this suggestion is too much out of left field but is it possible to build a house some where on the property with out reducing its value? If it is, it maybe worth considering doing this and moving into it as your PPOR. My understanding is that you can sell a PPOR on up to 5 acres of land with out it being subject to CGT?? Not sure if there are other rules that may negate this possibility? Just a thought. Best of luck.
Hallg
was it used for primary production in that time? This will change your tax.
Thanks all for your advice, very helpful! The property is owned equally by my brother, father and myself. Technically, it is a vacant lot, and the Council treats it as such by charging Vacant Rural Rates($2,800/yr, twice that of non-vacant)…but it has a very old Settlers Cottage on it that is outside the gazetted building envelope of 1 acre. My father has lived there since we bought the property, and has established a small Olive Grove of 24 mature trees(4m).
By my calculations, that means that 1 third of the capital gain can be removed, as was my fathers PPOR? Is that possible to claim PPOR on a "technically" vacant lot? Furthermore, we should only have to pay tax on 50% of the remaining capital gain because we have owned the investment for more than 12 months(50/50 rule) ?
And regarding claiming interest payments, am I right to assume that if we have been collectivley paying $500/week on an Interest Only loan, then at settlement we can offset the total cost of the interest paid over 10 years,
($500/week x 52 weeks x 10yrs = $260,000), against any capital gain we might make?
Im just learning all these little tax laws, so Im not sure if I explained that right? Hope you understood what I meant…
Thank you all once again for your wonderful advice!!!Jim
……….phenominal growth As with Steve's advice above, you need to see your accountant and with the numbers involved here, I would also seek a second opinion.
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