Hi All,
Does anyone know a way around paying the capital gains tax on your wrapped properties the same year you settle. Just imagine you complete 10 wraps or more in one financial year and the money has only just started to roll in form your investments, however come tax time you are charged capital gains tax (from the principal profit on your sale)on all ten properties that year. Thats some tax bill, and you wil have only recieved a minute percent of your actual profit. I know once settlement takes place the property is officialyy sold but does anyone know of a way around this concerning wraps. There may not be one, in which case planning ahead for the expense is necessary, but i did get caught this year.[embarassed] Any advice would be good Steve, that is one point I havent noticed in either of your books.
Regards
Michaelk
“We aim for Perfection, however excellence will be tolerated.”
You only pay CGT after contracts have been exchanged. In a wrap you dont exchange contracts with your purchaser until they make their last repayment, 25-30 years down the track, unless they re-finance earlier, rather than taking the loan to term.
Thanks G7,
I will try to explain it to my accountant again and see what he comes up with.
Michaelk
“We aim for Perfection, however excellence will be tolerated.”
Hi Michael,
Try this link – Julia is an accountant and makes a number of comments in this thread that may be of use to you.
https://www.propertyinvesting.com/forum/topic/11683.html
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
G7,
With property the ATO considers a sale to occur when contracts go unconditional, I haven’t kept up with CGT and wraps, but my understanding is with a wrap contracts are unconditional when or before the wrappees move in, and therefore CGT may be payable that year. If contracts are not exchanged or unconditional, then the wrapper does not have a contract with the people who will be buying their property, and they could simply walk out anytime.
Michaelk, I know a good way, try using a lease option instead of an installment contract.
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
Thanks Terry,
That is always a thought. However I have done further research and have found that through new tax ruling this year in march, wraps can be classed as trading stock, therefore the cgt can be delayed. Julia said as much in the thread that derek recommended aswell.
Thanks again
Michaelk
“We aim for Perfection, however excellence will be tolerated.”
You must be logged in to reply to this topic. If you don't have an account, you can register here.
