I was talking to a friend yesterday who trades on the Stock Market a lot.
Stock is subject to Capital Gain Tax and he was telling me how he made $8,000 in a day only to pay $4000 to Mr Carr.
Also that he is now considering setting up an Investing Company becasue since the main activity of the company is to make capital gain, it is considered income and will only pay at the company’s marginal rate that is 30%.
Now if that is the case, isn’t it the same for a company that buys and sells properties? If the company’s income is derived from the profits from selling and holding, wouldn’t then Capital Gain not apply and be considered income?
May God bless you
and prosper you.
MarcMarc1,
Let me know if you find out. Very interesting but i doubt that would be the case with IP everybody would be doing this.
Dom[biggrin]Hi Marc
The trouble with companies is they don’t get the 50% CGT discount for assets held over 12 months. Not many people buy and sell a property within 12 months, so most would qualify for the discount. So even if you were on the top tax rate of 48%, this would drop to 24%, beating company tax.
A better way would be to use a trust, and the profit could be distributed to the lowest income earners saving even more tax.
BTW, Capital gains tax is a federal tax, so he would be paying Costello.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yes Costello, what was I thinking…
So I discovered the wheelbarrow did I?[blush2]
May God bless you
and prosper you.
MarcHi Marc,
Definitely one for a property savvy accountant but the issue is the collection of rent which classifies the property as a passive asset and as such makes it ineligible for CGT exemptions.
If however you were to build/buy and sell without receiving rent from a tenant then the property could be considered as an active asset and then would be taxed as income and not capital gains.
While doing some research for another thread I came across this thread at Somersoft that may be of interest to you.
http://www.somersoft.com/forums/showthread.php?t=5327&highlight=deferring+CGT
Please remember I have no qualifications in this area and expert advise is recommended.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Derek is correct – DAAJ I suggest you reread Derek’s post.
Steve McK has actually written about the same topic in a recent forum post.
Cheers,
Aceyducey
Marc1
In respect of your friend’s situation – if he is trading frequently in shares then he may be eligible to be classified as a ‘Trader’ and not an ‘Investor’ in shares, in which case he would be allowed to treat his profit as income and not capital gains.
Ask him to look up the following link at the ATO websire for more information.
http://www.ato.gov.au/businesses/content.asp?doc=/content/21749.htmMy position is flip side of the same coin – I have a loss from share trading which I would be happy to offset against my normal income instead of carrying it as a capital loss. I recently found this out and am looking for a good accountant to get further advise.
Hope this info helps your friend.
Bid
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