Hi,
I have one property in Adelaide that is an investment, and another house in Qld that I live in.
Anyway, I have been renting the Adelaide house out for 1yr now, it is only JUST negatively geared.. I am not sure what capital gains tax is? Do I need to pay this if I decide to sell the house? A friend mentioned something about it applying only after 6years, is that 6years from the date i first started having it as an investment property? How much does it normally cost? If I sold the house after 6yrs of it being an investment, would i need to pay capital gains tax?Also, I am very close to becoming positive geared > is this a good thing considering I would need to pay tax rather than receive it?
Thanks everyone.
Shel
shel25,
Your friend is a classic case of someone who know something but not a lot.
The 6 years is related to moving out of your PPOR and then back in before the 6 years is up to sell it CGT free.
You need to pay CGT on your Adelaide property because it is an IP, not your PPOR.
But you only need to pay CGT if you sell it and if you make a profit. The negetive geared or positive geared has nothing to do with CGT. You pay CGT on the profit less 50% if kept for over 1 year.
eg. House cost $200,000 later sell for $250,000 three years later. You deduct your buying costs and selling costs eg say $20,000 so profit is $230,000 – $200,000 so its $30,000. Now take away 50% so its now $15,000.
You claim $15,000 on your tax as income for the year you sell, so if you are paying 30% tax at marginal rate then you pay 30% of $15,000 so about $5,000 tax. This is a rough guide, see the ATO site or just google CGT.Positive geared is good stuff, you can then buy more IP at negetive geared and offset with positive geared.
shel25 wrote:Also, I am very close to becoming positive geared > is this a good thing considering I would need to pay tax rather than receive it?
Would you rather on a marginal tax rate of 30%
lose 70% but get a tax refund for the 30% for expenses paid- negative gearing
or
make a small income and get taxed on 30% and keep 70% of the income- positive gearingShel, your question re +geared compared to -geared and tax is simple. Do you invest to make money or lose it? If you lose you can save tax, if you make $ you will pay tax after deductions which can be many. To not want +geared property is craziness!
You must be logged in to reply to this topic. If you don't have an account, you can register here.
