Hi all – just a quick question regarding capital gains tax and the date of the sale. I know that if I sell an IP within 12 months of purchasing I will pay capital gains on 100% of the profit, and after 12 months 50% of the profit. Is the date of sale the date the Contract is signed, or the date of settlement. i.e. if the 12 months is up on 1 May, contract is signed 1 April, but settlement date is 1 June. Does it go by the contract date or the settlement date?
Also, are renovations taken into account when calculating cgt? Put very simply if I purchased the property for $200k (including stamp duty etc), spent $20k on it and sold it for $250k, is cgt calculated on $50k or $30k – I'm hoping $30k!!
Any advice is greatly appreciated.
thanks!
Jess
Hi Jess
Simple answer the date of the contract is used for CGT and not the Settlement date.
The 12 months is calculated between the 2 Contract dates.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard – you've always got the answers!
And am I correct in the calculating of cgt? The tax office takes into account the amount of money spent on reno's?
Cheers
JessJust another question regarding cgt, which you may be able to help me with Richard (or anyone else!)…. I have heard that you can be an "owner builder" once every 3 years and pay no cgt?
So, my situation is, we have a PPOR for which we have lived in for 5 years, and we have an IP that we purchased in May this year, have just renovated and are obviously thinking of selling. (Although happy to wait until next year to sell, as I have a tenant moving in shortly for 6 months). But, in theory, if we wanted to sell the IP now, could we avoid Capital Gains Tax by saying we are "owner builders"?
Hope this makes sense!
Thanks
JessUMMM. NO!!!
You are not an owner builder. You are an investor. If that was the case no-one would pay CGT on investment properties. We could just say we are owner builders and sell one every 3 years.
I like your optimism though.
And yes. Add any money spent on reno's to your cost base.
Thanks Catalyst! Oh well, it was worth trying!
Cheers & thanks
JessJessW wrote:Just another question regarding cgt, which you may be able to help me with Richard (or anyone else!)…. I have heard that you can be an "owner builder" once every 3 years and pay no cgt?So, my situation is, we have a PPOR for which we have lived in for 5 years, and we have an IP that we purchased in May this year, have just renovated and are obviously thinking of selling. (Although happy to wait until next year to sell, as I have a tenant moving in shortly for 6 months). But, in theory, if we wanted to sell the IP now, could we avoid Capital Gains Tax by saying we are "owner builders"?
Hope this makes sense!
Thanks
JessThere is no such rule.
But you may be able to avoid CGT on the second property if you have previously lived in it at some stage.
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
As an owner builder you are only able to get an OB licence in your own name every 5-6 years not every 3. As Terry notes, you may be able to minimise your cgt by living in this property for some period during your ownership (preferably when you first bought it) however you can only have one PPOR at any one time (generally ie if you are selling the other home) however it will leave you liable to CGT on the other property – which may be worse.
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