Hi all,
I hope someone can answer this one for me.
If I were to sell an investment property and immediately use the profit as a deposit on another investment property, would I have to pay capital gains tax on the profit?
Thanks in advance….
Yes.
If you hold an I.P for less than 12 months then sell, you are liable for cgt on 100% of the profit.
If you hold an I.P for more than 12 months then sell, you are liable for cgt on 50% of the profit.
Any depreciation claimed during the time you hold it is added back on to the total as well, but all the purchase and selling costs are deducted from the total.
It may be better if you can keep the original I.P, and access your equity (profit) in your existing I.P for the deposit on your next one. That way you can delay paying cgt until when/if you ever sell.
Speak to your accountant about the cgt situation, and speak to a property investment savvy mortgage broker or lender about which type of loan you should have for the future.Cheers,
Marc.
[email protected]Yes CGT payable in Australia as it is different here to how it works in USA where you can trade up on investment properties. You can’t do the same in Australia. I can see where you are coming from but it is not as fair in Australia as it is in USA.
However depreciation and negative gearing are claimable in Australia where I think they may not be allowed in USA system.
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
One of the tricks of the trade if you are wanting to sell is to ensure that the Contract (remember CGT is based on the contract date and not the settlement date) is dated in a Tax Year where you may have some capital losses to offset.
As Marc mentions why sell the place why not use the equity and get your MB to structure you loan in such a way that enables you to carry on claiming the deductions as well as utilise the equity for further investment purchases.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
The name of the process in the USA where you ‘trade up’ your property to another more expensive one without paying cgt is called a “1031 exchange”.
You can still claim costs in the US but I don’t know how the whole situation is calculated aginst your normal income tax.Cheers,
Marc.
[email protected]
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