All Topics / General Property / Rolling over CGT?

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  • Profile photo of kay henrykay henry
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    @kay-henry
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    November 11, 2003 - 2:46 am

    I’ve been told by a friend of mine that if one sells an IP (A) at around the same time one buys another IP (B), then the capital gains tax from (A) can be rolled over to be used as a deposit or whatever on (B). My friend told me the sale and buying of A and B have to be within a close proximity.

    Has anyone heard of this? It seems amazing to never have to pay CGT, as in one being able to sell and buy continuously and therefore CGT disappears!

    kay henry

    Profile photo of ChrisHallChrisHall
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    November 11, 2003 - 2:56 am

    CGT will never disappear! It is simply defered until a later date. I’ve heard this being done quite effectively, but Steve mentions the consequence of this in his book that once you hit retirement and start selling off – you have huge capital gains tax to pay the tax man at a stage in life that you may not of calculated for or can afford. CGT is only ever defered! In a trust structure it can be defered for generations!! But it will catch up (:

    Chris

    Profile photo of TerrywTerryw
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    November 11, 2003 - 3:18 am

    Kay

    You’re friend might be american? Rolling over of CGT is not allowable in Australia. Or maybe they were talking about selling the PPOR?

    Terryw
    Discover Home Loans
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    Profile photo of kay henrykay henry
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    November 11, 2003 - 3:30 am

    So is it deferred a la Chris’ reply with reference to Steve’s book? or illegal a la Terry’s reply?

    Please explain?

    kay henry

    Profile photo of ChrisHallChrisHall
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    November 11, 2003 - 4:25 am

    Free advice is dangerous!!

    I’ve just chatted to my tax adviser and he said such a question is not an easy one and he will get back to me with specifics – I will gladly pass the info on later today (:

    Chris
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    Profile photo of melbearmelbear
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    November 11, 2003 - 4:26 am

    I’m with Terry on this one. I know that in the USA this practice is extensive, but have never heard of it here.

    Chris, where is the mention of this in Steve’s book? I’d love it if it were true here, but I don’t believe so.

    Cheers
    Mel

    Profile photo of ChrisHallChrisHall
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    November 11, 2003 - 4:54 am

    CORRECTION!

    No, Steve does not mention that CGT is transferable but mentions to be aware of tax deferral regarding claimed depreciation included in CGT at time of sale etc. p.141 – 142. and general warnings about CGT in retirement. Sorry for mixing the two together.

    Profile photo of melbearmelbear
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    November 11, 2003 - 4:57 am

    Thanks for that Chris.

    Cheers
    Mel

    Profile photo of westanwestan
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    November 11, 2003 - 7:10 am

    hi all

    sadly you must pay CGT as Terry and Melbear have said. Chris i’m supprised that a tax advisor finds this one “not an easy one”, you are paying for this advice?
    westan

    Profile photo of ChrisHallChrisHall
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    November 11, 2003 - 7:24 am

    No, this advice will be free – so maybe dangerous (: Lets see what he comes up with??

    But my Account just informed me (for free!) that in Australia you can’t roll over CGT on investment property – you can if you are running a business from it though. In business (my major background) you can roll over CGT to purchase more equipment etc.

    The other guys are much more correct than me!!

    Chris

    Profile photo of ChrisHallChrisHall
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    November 12, 2003 - 4:26 am

    Just found this one out – maybe its common knowleged, but it might help somebody (:

    According to a tax expert!!! (who just got back to me) you only pay 25% CGT on commercial property that you’ve had for over 12 mths (50% if under 12 mths). No roll over is possible!! Residental is different, as you would know.

    Disclaimer…as with all free advice… you’d better check!!

    Chris (:

    Profile photo of kay henrykay henry
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    November 12, 2003 - 4:29 am

    Dear all,

    Thanks so much for your information :o) I thought it seemed too good to be true. I really appreciate your replies.

    Cheers,

    kay henry

    Profile photo of shaunwalkershaunwalker
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    November 12, 2003 - 4:42 am

    Please tell me if i’m wrong (a little confused)
    with an IP, if you sell after 12 months doesnt that reduce how much capital gains you pay?

    Profile photo of ChrisHallChrisHall
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    November 12, 2003 - 4:49 am

    Yes, on a residential property you only pay 50% of the gain in CGT after owning it for 12 mnths. On commercial property you only pay 25% of the Capital gain in CGT after 12 mnths.

    AIUI (as I understand it)

    Chris

    Profile photo of Richard TaylorRichard Taylor
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    November 12, 2003 - 4:58 am

    To correct Chris you need to actually hold the asset for 1 year and 1 day to benefit from the halving in CGT rate.

    Have had many clients who have come a cropper thinking it was 1 year.

    Cheers Richard
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    Just a solution waiting to be found

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    Profile photo of shaunwalkershaunwalker
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    November 12, 2003 - 5:16 am

    Ah that makes sense. didnt know about the one year and one day ruling though. nice!
    thanks
    shaun

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