hi all
is that right that if you claim your depreciation on your building costs that you have to pay it back when you sell.
regards
alfHi Alf,[
]Go to http://www.ato.gov.au and download their guide to depreciation.
They also have a guide to capitol gains tax.Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi Alf
Yes, it may be a “balancing item” when calculating the “cost base” for CGT purposes.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auAlf,
if you claim Division 43, then the amount you claim will be equal the amount reduced by your cost base. this is assuming your asset was purchased after September 1985
if you claim division 40, then there will be a balancing adjustment from the time you dispose of the asset
hi all
divsion 40 etc doesn’t mean much to me so its abit over my head at the moment.
The reason i asked is because i picked it up in steves book page 142.
Its seems by the responses its not as straight forward as i first thought which was
purchase price minus selling price
and any costseg. pruchase 100000
sell 200000
costs 10000
profit 900000held more than 12 months
50% no cgt
other 50% =45000@30% tax rate
=13500 cgt to paythis how i have been led to beleive it works.
regards
alfAlf,
that’s the simplified version
but there are so many variables
need to know what your situation is
what entity did you use to buy this assethi mensch
It was bought in my both names my partner and i.
the version i indicated is the version my accountant gave me.
No mention of all this other stuff.
regards
alfDid u claim any depreciation on the property?
hi mencsh
yes
have had the propertry just over 2 years bought of the plan.
we have claimed depriciation
building
furniture
fixtures etcreagards
alfmencsh, hi, I’ve just been trolling through the ATO guides about deprecitation & CGT. They state that your cost base is reduced by the amount you claim for capital works, (eg 2.5% of the cost to build the property), but I can’t find any mention of whether depreciation of your carpets, curtains etc affects the cost base or not. Can you clarify this. Please don’t quote numbers like div 43 or div 40!
Thanks, Jim.Alf
Div 43 is when you claim building depreciation
Div 40 is when you claim furnitureeg. You paid $100,000 for property
u sell for $150,000
Div 43 – u claim $10,000 of building depreciation
Div 40 – u claim $5,000 of fixture and fittingsWhen u sell, u have to do balancing adjustment of div 40 – lets assume its $3000
You assessable CGT is $50,000 + $10,000 + $3000
total is $63,000
50% discount $31,500 (assuming ur on 48.5% tax)
your tax is $15,277now there are also other implications like GST,
if you are liable for GST, then u will have to pay $13,636 GST on the sale.so like i said depending on your circumstances, if GST is applicable then your total tax will be
$28,913 (sux huh)but most people will not have to pay GST, but depends on your situation
if your accountant does’nt tell u this, get a new accountant.
My charter accountant did’nt know about this, I had to learn it myself. I now have a new accountant who still does’nt know about this, I have to tell him what to do! go figure?Thanks mencsh for clarifying those numbers, but I’m still not sure what a balancing adjustment means.
“When u sell, u have to do balancing adjustment of div 40 – lets assume its $3000”
How do you come up with the number? I assume it’s got something to do with the expected life of the fittings, but I would really appreciate a clarification. Thanks, Jim.Mensch,
Your example of GST payable, is it correct that you pay the full amount of GST on the sale ie one eleventh of the whole cost. I understood that the GST would only be on the difference between the original purchase price and the sale price. Not to mention exemptions like going concern and the margin scheme etc.
Boy that ATO website is frustrating to find info in! It explains how a balancing adjustment on a car works, but how do we work out how much of our sale price of a house is due to the carpets?!
Waiting with bated breath for enlightenment, mensch. Thanks I.A.Because mencsh has ignored my question I finally asked my accountant about the fittings depreciation. It’s very simple really, our cost base is decreased by $1 for every $1 we claim as a deduction, and increased by $1 for every $1 we spend on new fittings we have replace during the ownership of the property. His wording was a little different, but that’s the result.
In mencsh’s example above then, $5k was claimed for depreciation of fittings, but only $3k was added to the CG (not CGT mencsh!). This means that $2k was spent on new fittings at some stage. Is this what you meant mencsh?
Jim.My accountant told me the same but the Taxman told me differently. He showed me the CGT book & explained that we don’t have to add up that depr. amount to the cost base.
I asked Ms Margaret Lomas this question. She said it’s a grey area. 2 of her clients wrote to ATO & got reply from them that they didn’t have to add up that depr. to the capital cost base.
Hope we can get a better explanation for everyone from ATO.
[?]
Thanks VH. As I wrote above, I couldn’t find any mention of it in the ATO website. It should be clarified, as it could make a $30,000 difference to your capital gain.
Jim.I’ve just asked Noel Whittaker to clarify this. He replied that he will respond in Sunday Week’s Sunday Mail. Should be interesting.
JimHi Jim,
Can you post a summary of his response here?
thanks,
Rod.
Just this Rod:
Quote**********
I’ll be doing an article on this in the Sunday Mail on Sunday week so it
should answer your queries.Regards
Noel
End Quote**********
Jim.
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