All Topics / Legal & Accounting / Offsetting Capital Gains

Viewing 9 posts - 1 through 9 (of 9 total)
  • Profile photo of Michael_CMichael_C
    Member
    @michael_c
    Join Date: 2004
    Post Count: 32

    I was reading an article about offsetting capital gains tax if you purchase a more expensive home with the cash accumulated from the sale of the original property.

    Thank you

    Michael collins

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

    Michael C

    This rollover relief only applies in America. Robert Kiysaki talks and writes about it but it does not apply in Australia, he is from the US. In special cases such as compulsory acquisition rollover is allowed otherwise it is only available to active assets of a business and it specifically excludes assets that have been used to produce rental income section 152-40(4)(e).

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

    Profile photo of Michael_CMichael_C
    Member
    @michael_c
    Join Date: 2004
    Post Count: 32

    Thank you for that it is greatly appreciated as I was becoming confused when this idea was raised.

    Michael collins

    Profile photo of FFCommFFComm
    Member
    @ffcomm
    Join Date: 2004
    Post Count: 627

    In the US it’s called a 1031 exchange (or like-kind exchanges), but here it’s not really avalible (as per Julia’s post).

    Rgds.
    Lucifer_au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    You can do various things to reduce your CGT by reducing your income for that year. eg. prepaying some interest on investment properties, those 100% capital guarranteed share funds etc.

    Terryw
    Discover Home Loans
    Mortgage Broker
    Click below to email me

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Michael_CMichael_C
    Member
    @michael_c
    Join Date: 2004
    Post Count: 32

    Terry can you please explain what you mean with regard to your comment as I am sorry but I do not follow.

    Thank you

    Michael collins

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Michael

    The CG is just added to your other income for the year, so the rate will be higher if your income is higher. bringing expenses forward will help reduce your income, so this will reduce the rate you pay on your CG. If you had $500,000 worth of IP loans, eg, you would pay about $30,000 per year in interest. So if your income was $30,000 and you prepaid the interest for next year, your taxable income would drop to nil. so any CG would be added to $0, and you would save tax. of course, it would be hard to prepay such a large amount, but if you had a large gain you may have some cash lying udner the bed. or you could even borrow to pay the prepaid interest. of course, you have to be careful, as next year you would have few expenses, so your property may make a huge gain, and you will have to pay more tax.

    Terryw
    Discover Home Loans
    Mortgage Broker
    North Sydney
    Click below to email me

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Michael_CMichael_C
    Member
    @michael_c
    Join Date: 2004
    Post Count: 32

    So what your saying is that you can actually prepay your interest on your other IP loans it will in turn decrease your income tax bracket? or CG tax level? Does this make any difference if your purchasing it through a business or personal?

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    I still see no benefit in paying interest in advance to decrease tax when you can buy another property or two and increase income. Why lose the use of every dollar when the maximum you can save is 47 cents (if your structure is bad) in each dollar?

    By the way, you can have your tax apportioned weekly, fortnightly or monthly so you can use it to make more money. This is a more effective strategy in my opinion!

    Robert Bou-Hamdan
    Mortgage Adviser

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