hahahah
caused you to lookanyway.. hypothetical situation, im not in this …yet
say you bought prop 10 years ago 200K
today 400K done by qualified valuer
u still working and earn income 100K
tax @47%
wanna sell but need to pay 200K, right
(just pretend the base cost – stamp, legal etc not accounted for to make it simple)but you give house to wife(no stamp duty) and she doesnt work, so no income OR you pay stamp duty and “sell” it to your mum/dad who is retired who doesn’t have income
so in these situations, don’t you not pay CGT on 200 K because you “sold/tranferred the property” @400K valued. This is of course, in the case of mum/dad they actually stay there for one year so its their property and dont pay CGT
Whaddaya think
Hi fjficm,
Not an option, so I have been told; if it were that simple, everyone facing a possible CGT bill from the sale of his/her property would “give” it over to their spouse.
I asked about it, but was quickly informed that it could not be done; that gifts were limited to a certain amount (eg. 50K), and even if it was possible, you would be giving it at “market value” of 400K. The ATO would view this as a huge tax dodge.
As for selling it to your mum or dad, who have no income; once they have the property, they have an asset, which unless they live in it, becomes a taxable income (IP), and may even affect any centrelink benefits. Either way, they are liable to pay stamp duty, and YOU still pay CGT because of its increased value from 200 to 400K.
Nice try!!!!
If it could work, I am sure many would have done it long ago (me included).
Jo
P.S. I cannot make any guarantees on the information contained herewith, it is only based on what has been told to me by my accountant.
PLEASE REFER TO YOUR ACCOUNTANT, FINANCIAL ADVISOR or THE ATO for more accurate, and detailed information.Hi fjficm,
Not really an arms length transaction by any stretch of the imagination.
.
The definition of a CGT event is extremely broad. As far as I remember monopoly is right. They would only be interested in the market value at the time of the CGT event ie the date of contract.
.
Hardly seems fair though.
.
Henrythx Jo
apart from cute youre smart
yeah, i get it
when i “sell” to parents, i forget that i had to first pay the 200 K CGT first cos this is assumed and eventhough there is no money transferred theorectically
Someone asked a similar question recently. You would have to pay CGT and stamp duty at market value.
Don’t forget in the above eg, you would get 50% discount on the capital gain, so only $100,000 would be added to you income. you would pay around $50,000 tax max.
But there are still ways to decrease the tax you pay on the capital gain -eg pre pay interest on one or more loans in the same year.
This is another reason to buy in a trust structure – because you could then pass the gain onto the person with the lowest income.
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
Awwwww shucks fjficm [blush2]
Thanks, I just wish I could’ve told you that it would work; for both our sakes!!!! I sold one of my IPs and now have a CGT bill (sitting right in front of me, here on my desk)for $77,000 [bawl]
If anyone can come up with an answer, that would be great; but for me anyway, what’s done is done, and now it’s time to PAY, and PAY BIG!!!!!! [agro3]
Cheers,
Jo
thx terry i forgot
yo jo(heheh)
if you got a portfolio account, then you can fix all your interest and pay it that year(ie on other subaccounts) and togethter with the interest for that year
eg total interest for 1 year is 30K
anyone, other ideas to reduce CGT!!!!
+ another 30 or so K = 60K in interest
yeahhhh
thx terry
This financial year I have sold two properties, with a total CG for me of $120K (roughly). I’ve only just done my tax return for 02/03, but I am showing a loss of $107K. Carried forward to this year, my income was about $62K with leave all paid out etc., so adding my $60K (half of the $120K) to the $62K = $122K, BUT then I get to subtract the loss carried forward, ie $107K = new income of $15K. This will be wiped out by all the depreciation and other deductions I have for this year, so I believe I will carry another loss forward to FY 04/05! Could even sell another property, but I don’t like selling……
Oh yeah, the big loss is from depreciation, and a whole bunch of stamp duty that I paid on property purchases in the ACT ($100K with partner in 02/03) which is tax deductible!!! Gotta love ACT purchases….[
]Cheers
MelTerry trust guru please confirm:
If you set up your trust with a corporate trustee houses are viewed as stock thus don’t attract CGT ?Wallflower
I don’t know about that? I think it dpends how frequetly you buy and sell. I don’t think a trust has anything to do with it as my trust has had to pay CGT – sorry, i meant distribute capital gains.
fjficm
Another strategy. Macquarie Bank, ANZ and CBA all offer some sort of capital guarranteed share investments. They work with the bank lending you up to 100% (I think) of the share value, you hold the shares for a fixed period, and then you can ‘give back’ any that have dropped in value for the same amount they cost you. The rates are high – like 15%, but getting a large portfolio and prepaying the interest will dramatically decrease your annual income and hence CGT bill. You just have to work out if the shares are likely to increase enough in value to make it worthwhile.
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
Mel..$15K Income..
Oh well, get all your dental work done, go to lots of movies, take the train or bus..As you can now have a “concession card” [upsidedown]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOriginally posted by redwing:Mel..$15K Income..
Oh well, get all your dental work done, go to lots of movies, take the train or bus..As you can now have a “concession card” [upsidedown]
Yep[biggrin]. Lucky I’ve moved back home to save some money – can’t do much with only $15K! A concession card would be nice. I was thinking about trying to get the dole now that I’m not ’employed’, but I reckon they wouldn’t give it to me as I ‘own’ too much[comp]. Haha
Cheers
MelWallFlower:
Houses are considered stock only if the trust is in the business of property trading. Generally you would not be too happy to be classified as a property trader because the total proceeds from the sale will be an assessable income.For example, you buy property for $100,000 as a property trader and sell it few years later for $300,000. Inititally you could claim $100,000 as a deduction when you purchased the property, but when you sell it, $300,000 will be assessable income (or to be more precise: the net income of the trust) which when distributed to the beneficiaries or unit holders (depends what sort of the trust is it) will be fully assessable in your hands.
Cheers
Vkolaj
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