All Topics / Legal & Accounting / CGT + Reno+ Sale = Question

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  • Profile photo of Supa FreakSupa Freak
    Member
    @supa-freak
    Join Date: 2004
    Post Count: 101

    Hello fellow journeyrs
    Question:
    We are thinking of buying, renovating + Selling.
    We will buy in our trusts name, so if we sell the property under 12mths of holding it i assume we won’t have to pay CGT coz profits get distributed to beneficiaries ( or however that’s spelt) and also the house is looked as trading stock. Right or wrong?

    Profile photo of masteraccountantsmasteraccountants
    Member
    @masteraccountants
    Join Date: 2004
    Post Count: 77

    Hi,

    According to your stated intention of buying a property for the purpose of resale – instead of as an investment as a rental property – you wouldn’t have to pay CGT.

    You would pay tax on the whole of the profit made. At least with CGT you obtain a 50% exemption – you don’t pay tax on half of the net profit.

    I don’t know if that is a cause for celebration in your camp, but it wouldn’t be in mine.

    I happen to live in a country that doesn’t have CGT. Now that is cause for celebration! We have to be careful about saying that we are buying properties with the intention of resale at a profit – then we get taxed on the whole profit.

    Christopher Raynal
    Master Accountants Group Limited
    PO Box 46018 Herne Bay
    Auckland New Zealand
    Ph +64 9 360 3259
    Fax +64 9 360 2180
    http://www.masteraccountants.co.nz

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Its true that trusts don’t pay tax (normally), but the beneficiaries do on the distributed income!

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of JuliaJulia
    Member
    @julia
    Join Date: 2004
    Post Count: 217

    Supa Freak,
    Buy a property with the primary purpose to make a profit on resale CGT does not apply normal income tax does so no CGT discount.
    Buy a property with the primary purpose of gain income from renting it out CGT applies on sale so if held for more than 12 months 50% discount (unless held by a Co.)
    Trust or individual someone must pay tax on the profit. A trust is taxed at the maximum tax bracket unless the profits are distributed. If this is the case tax is paid at the beneficaries marginal rate.

    [email protected]
    http://www.bantacs.com.au

    Profile photo of Fast LaneFast Lane
    Member
    @fast-lane
    Join Date: 2004
    Post Count: 527

    I’m not sure if this is right, but couldn’t you put the property into its own trust, then later on simply sell the trust?
    You dont have to pay CGT on selling a trust, therefore you pocket all the profit, is this right?

    Profile photo of JuliaJulia
    Member
    @julia
    Join Date: 2004
    Post Count: 217

    g7,

    How can you transger ownership of a trust that has your family members as beneficiaries without tiggering a CGT event by changing the beneficiaries.

    Julia Hartman
    [email protected]
    http://www.bantacs.com.au

    Profile photo of Supa FreakSupa Freak
    Member
    @supa-freak
    Join Date: 2004
    Post Count: 101

    Thanks Julia, my accountant just loves you!!

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