Hello forumites
If I sell an IP within one year of buying it, do I pay CG on selling?
(I don’t think I do)
Also, is the date of settlement or date of finance approved taken as the first years anniversary.
Without going into much detail here, I’m faced with (maybe) having to sell my recent IP purchase after only 9.5 months and want to clarify the above points with more experienced people.
Yep. you will pay tax. If you have held the property longer than 12months then you may get a 50% reduction on the CG. If less, then no deduction.
The relevant date is neither of those, but the date of the unconditional contract.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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
What does that mean Terry?
The date you exchange? The date you sign the contract?
So for example I can sign the contract……have a 12 month settlement, then sell the next day and get a CGT discount? Please calrify for me.
Cheers ![mario]
Originally posted by tenorBb:If I sell an IP within one year of buying it, do I pay CG on selling?
Only if your capital proceeds are greater than your cost base.
Hi all
Actually I just double checked this on the ATO site last week, due to one of mine having a long settlement.
They say the date you sign the contract or offer/acceptance and I double checked with my accountant.
Here’s the cruncher its both ways when you buy and when you sell.
they call this a CG avent.What you need to watch for is: if you sign a contract to sell in may06 and they have say 21dys for finance and then 28dys to settle (july 06) you will be receiving the settlement monies in the next financial year, but you will have to pay tax on the CG in the
current financial year. Therefore paying tax on monies you have not received yet.I have found that a lot of people think CG tax is 50%? So just in case I will clarify it. CG gets added to your taxable income and the tax is calculated at what ever PAYG rate that takes you to. (Taxed same as if it was wages). if you hold the property for more than 12months you get a discount, you only add 50% of the CG to your wages to calculate the tax.
Also, I would make sure I have at least 1 weeks grace in my calc for the 12 mths, I have heard stories of being 1 day short etc.
Celeste[biggrin]
That is correct. It is from the date you signed the purchase contract to the date you sign the sale contract.
Whether there are conditions within the contract does not make any difference – normally they will be conditions to get you out of the contract anyway.
and like Celeste said make sure you have a buffer. Personally I prefer to sign the selling agents agreement at least one day after the 12 months.
Regards
JohnInspired Finance
[email protected]
(02) 9944 7776Isn’t it the settlement date of the purchase the date that counts here?
A simplistic way to look at this might be to say the event starts from the time rent is payable to you under the terms of the contract, this maybe before settlement but more likely not though. Possession seems to be the important factor here and again the contract may grant possession prior to settlement and this would be the start of the event.
Mmmm?
[hmm]Opportunity in everythinng
Hi Opportunity.
No it is the Contract date as stated previously.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner.
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
Originally posted by Opportunity In Everything:Isn’t it the settlement date of the purchase the date that counts here?
A simplistic way to look at this might be to say the event starts from the time rent is payable to you under the terms of the contract, this maybe before settlement but more likely not though. Possession seems to be the important factor here and again the contract may grant possession prior to settlement and this would be the start of the event.
Mmmm?
[hmm]Opportunity in everythinng
Well if everything was equal but it is not. To easy to rort, as a contract can be changed.
Imagine I buy, and sell with 1 minute, with a 12 month settlement on my sale. As part of the contract the buyer gets all rent for 12 months, but must give me 99.9% deposit, and release the deposit to me. [biggrin]
The buyer does not care, as its my tax issue not his, and possibly there was an incentive for him as well.
Regards
JohnInspired Finance
(02) 9944 7776
You must be logged in to reply to this topic. If you don't have an account, you can register here.
