If I purchase an old tired house for $200K, spend $30K renovating and then sell for $300K, am I up for CGT and if so how much? (real life scenario, numbers simplified a bit)
Your CG is $300-$230 = $70. If you buy & sell in less than 12 months you will pay tax at your marginal rate on $70k, if you hold out for 12 months then cgt reduces by 50%.
Thanks IPfreely, other variable is how is this altered if purchased by our family trust? (if at all)
You will need an accountant to clarify this as it depends on your trust structure. I believe that discretionary trusts are entitled to 50% GCT discount if held for 12 months or more.
Cheers,
LukeTrusts don't pay tax (usually) what would happen, if it is discretionary, is the profit of $70,000 would be distributed to beneficiaries of the trust by the trustee. The money is then income/capital gains in the hands of the beneficiaries and they pay tax on it. Usually this is done with tax efficiency in mind with the low income earners of the family group getting the most so that less tax is paid. eg.. if you were an adult and not working you could get up to $16,000 pa with no tax payable
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:Trusts don't pay tax (usually) what would happen, if it is discretionary, is the profit of $70,000 would be distributed to beneficiaries of the trust by the trustee. The money is then income/capital gains in the hands of the beneficiaries and they pay tax on it. Usually this is done with tax efficiency in mind with the low income earners of the family group getting the most so that less tax is paid. eg.. if you were an adult and not working you could get up to $16,000 pa with no tax payableThanks Terryw,
That was the plan. I would do the actual renovating and then sell sometime after completion and distribute profit to my lower income earning spouse and 4 kids.
Or alternatively hold, and revalue/refinance to utilise new equity towards another trust purchase.
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