All Topics / Help Needed! / Extend Settlement Date?

Viewing 13 posts - 1 through 13 (of 13 total)
  • Profile photo of arnitravarnitrav
    Participant
    @arnitrav
    Join Date: 2004
    Post Count: 10

    Hi All, Was wondering if someone would like to help me out please. This is our first venture into real estate other than our PPOR. We have a contract to sell our first reno, signed last week, with the buyer’s clause in contract that we complete final unfinished work by settlement date. The sale will give us a pre-tax profit of $60,000. However, since signing, we have spoken to Accountant and learned that we will be required to pay an extra $10,000 in CGT since we will fall 7 weeks short for the lower 50% CGT assessment that applies after holding the property for 12 months. Do we put the $10,000 extra capital gains tax payable down to experience or do we ask for a 7 week extension to complete the unfinished work, and see if we can string it out? Thank You in advance.

    Profile photo of HutchHutch
    Member
    @hutch
    Join Date: 2004
    Post Count: 137

    Wow arni!
    When was your accountant going to tell you that?
    That is a huge oversight in my opinion. Or did you only tell your accountant after signing the docs?

    Anyway… try and do everything in your power to get that extension. Even if you have to offer a small cash incentive (to the other parties).

    Otherwise you will have to just put it down to an experience in your IP journey.

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

    ATO determines a sale to occur when the contracts go unconditional. So extending the settlement won’t have any effect. Best to put it down to experience. I am sure you won’t make that mistake again!

    Terryw
    Discover Home Loans
    Mortgage Broker
    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 arnitravarnitrav
    Participant
    @arnitrav
    Join Date: 2004
    Post Count: 10

    Hi again, Hutch, Thank You for your response. We hadn’t spoken to Accountant when we signed. In fact, we weren’t intending to sell house, were considering options of selling an adjoining block of land, intended to sell it and putting the proceeds into the loan, which would have left us a with a great rental home with (we expected) less than $50,000 owing on it. We asked 3 Real Estaties for values for the land, and were made an offer that way exceeded our expectations for both house & spare block. Contract was signed on same day. We now realise how not smart we were!!
    TerryW, Thank You for your comments also. But would you clarify what “unconditional” means please? Does that mean “on settlement day”, or does it mean, “when buyer’s finance has been approved, and we have completed the last few jobs stated in Contract”, which were the 2 clauses in the standard 30 day Contract? Hubby wants to put this one down to experience as you said, but I just want to ensure there are no options left for us to salvage that money.

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086

    Hi Arnitrav,

    Terry is spot on. The contract date is the date that is relevant for your CGT. There is not too much you can do now.
    .
    On a positive note if you get right into this reno thing this will work to your advantage if you can negotiate long settlements on your next project.
    .
    Good Luck.
    .

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of williwilli
    Participant
    @willi
    Join Date: 2002
    Post Count: 186

    ‘Un-conditional’ means the date in which the contract has no more ‘conditions’ to adhere to. Basically once the purchaser has no “out”.
    This is generally once finance is approved. Technically you possibly could argue that the contract is not ‘un-conditional’ as the reno work has not been completed, as that is a clause but you would be grasping a straws there.

    Sorry….

    Pete

    …Beware of the dreamtakers…

    BTW – I was part of the MAP Program and am more than happy to answer and questions/comments you may have – Happy Investing…

    Profile photo of arnitravarnitrav
    Participant
    @arnitrav
    Join Date: 2004
    Post Count: 10

    Hi Don, Liz & Pete, Thank You each of you for your advice. After listening to you all, I realise we should have both researched things better, and talked to Accountant before signing anything. My late Father once said, You buy your experience throughout life – it certainly is applying to us.
    Don & Liz, We have considered doing more renos in the future, and will heed your words. We completed this first one inside our budget. Carpenter hubby turned house from worst house in street to the best, did an amazing job. It took way longer than we had planned, but it was a week-end, spare time thing. We’ll be putting much more research and planning into future projects.

    Profile photo of LizardKingLizardKing
    Member
    @lizardking
    Join Date: 2003
    Post Count: 8

    Are you sure the ATO considers the sale date of a property when it goes unconditional?

    All my reading points to date contract was signed. Finance could take 2-4 weeks, which is a long time. So how long did your finance take for sale to become unconditional?

    Give the ATO a call and give your heart a rest! [cap]

    LizardKing

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086

    Hi Arnitrav,

    As you have found out you will need to set a money budget as well as a time budget.
    .
    If huddy is a tradesman and you are on the same page as a couple then you have the potential to do well with the reno’s. There is alot to consider.
    .
    Find yourself professionals that you are confortable with and who understand what you are trying to do. Sit down with the accountant and explain each project.
    .
    Timing will become a very inportant issue.
    .
    Good Luck.
    .

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of arnitravarnitrav
    Participant
    @arnitrav
    Join Date: 2004
    Post Count: 10

    Hi Lizard King, It turns out you are correct. I clarified with both ATO and Accountant this morning – your 12 months begins when you sign a contract to purchase a property, and ends when contract to sell is signed by both parties. (Probably to stop situations exactly like ours). Thanks heaps Lizard King.
    Don & Liz, I accept your great advice, and shall certainly be checking in with Accountant etc in the future. This first one was a learning curve for us both in many ways. Although hubby has completed stunning work for others, this was the first one he’d attempted for himself (apart from PPOR which he’s finished off just beautifully). We are a team, but he’s a hands-on bloke – give him a task to complete and he’ll do his absolute best on it. He relies on me to do the thinking & business stuff for him – trust that weighs quite heavily on me, I might add. So I need to get smart in a hurry, if we are going to make a success of these renos. Hubby expects to receive his Builder’s Registration in a week or so, so we have more options in the future. He’s not interested in building homes for others, just doing stuff for us. Over the years, he has completed lots of houses, extensions, removal homes from the actual shift, re-stumping, right up to the finished item with the WOW factor for other people. Wants to do this for himself. We’re a little different to many people, in so much as he knows exactly what he’s doing, costs etc, it is my role in this that is the weak part.
    I must explain also, this first house took so long to complete, as hubby had months off work with a malignant melanoma last year, and time got away on him. So I guess in the future, you will hear from me again, asking advice. Thank You each of you for your help, you have been great. Not one person who has replied has told me I was the dill I feel I am.

    Profile photo of williwilli
    Participant
    @willi
    Join Date: 2002
    Post Count: 186

    Best of Luck !!! Keep us informed of future ventures….

    Pete

    …Beware of the dreamtakers…

    BTW – I was part of the MAP Program and am more than happy to answer and questions/comments you may have – Happy Investing…

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086

    Good to see you are working as a team. Best of luck with your new ventures.

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of arnitravarnitrav
    Participant
    @arnitrav
    Join Date: 2004
    Post Count: 10

    Hi Pete, Liz & Don, Thanks heaps guys. Have been to the library this morning, and armed myself with some books to hopefully educate myself with. This error we have just made doesn’t seem to have fazed hubby at all – he is excitedly looking for another house with potential. I shall keep you all posted. Happy Easter everyone!!!!!

Viewing 13 posts - 1 through 13 (of 13 total)

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