How do you save on Capital Gains Tax?

Live in it as ppor or hold on to it for 12 months or sell at a loss.

Sure it is a typing error by Terry but CGT is calculated on the Contract date (of course depending in which State you are in this could be the Exchange date) so just need to watch that.

One way of eliminating CGT is never never sell.

Appreciate it sounds silly but it does work.

Cheers

Yours in Finance

Hi Wade Anthony,

This is my strategy and I’m 100% sure that it is NOT the best but it works for me.

Wherever possible, I sell in July. Or I delay settlement till 1 July so I am able to have 12 months in which to put in place a tax minimisation plan. Remember that tax minimisation is not the same as tax avoidance. The former is legal, the latter illegal.

Please note, I said, whenever possible. This means the benefit should far outweigh the negative, in terms of timing.

Tax minimisation may mean spending some of the sale proceeds to do some repairs or capital investment in another property. Or, re-investing the tax dollar before it is required to pay ATO.

When I sell in July, CGT is not payable for another 12 months, and then I waited till October to file my income tax. If I’m anticipating tax refunds, I file in July. If I’m anticipating owing ATO money, I file in October. Time, after all, is golden. It can be your best friend.

I hope this makes sense.

Angelina

No you will be paying it on $50,000 less of course certain adjustments.

Doesnt matter what you do with the cash you still pay Tax on it.

Think you are getting confused when it comes to selling a going concern business.

Cheers

Yours in Finance

Can you pre-pay a variable interest only loan?

Can you put any of the CG into your super? Would that be beneficial?

My parents were discussing with me today whether there was any way to avoid a huge CGT bill on my inheritance from them. The inheritance will be solely from their property which is their PPOR. I saw on the ATO website the following

Since 21 August 1996, if you inherit a house that was the ‘main residence’ of the person you inherited it from, you may be able to claim a full CGT exemption for it. If you can’t, you will need the market value of the house at the date of their death and details of all relevant costs incurred after that.

Does this mean that their house being their PPOR and them having owned it since 1990 would be CGT free or is it only if you meet certain other criteria?

If you bought a place for $200k, and sold it for $250k, it goes like this:

Acquisition Costs:

Property   $200,000
Stamp duty   $10,000 (approx)
Building & Pest Inspections   $500
Solicitor Fees  $800
Total   $211,300

Renovation Costs:

Let's say $7,000

Holding Costs:

Bank Interest: $520

Selling Costs:

Real Estate Agent (Selling Agent)  $5,000

So it goes like this:

$250,000 – $211,300 – $7,000 – $520 – $5,000 = $26,180

Let's assume you hold the property for a year to reduce the CGT.  So you put a tenant in it for a while because you are not going to spend a year renovating a $200k property, and you won't leave it empty.  So you get the 50% cgt discount.  So CGT will be calculated on half of $26,180 which is $13,090.  This figure ($13,090) will be added to your day job taxable income to determine the overall tax you owe the ATO for the year.  If you are in the 37% tax bracket, you'd thus owe about 37% of $13,090 which is $4,843.30.  So your "true profit" is actually $26,180 – $4,843.30 = $21,336.70.

Now.  Remember that property goes up in price about 10% a year.  Since you originally bought a place worth $200k, the same place would be worth $220k after a year.  Not really worth it in my opinion.  Especially since you are also going to have to pay stamp duty to buy back into the market.  This sort of stuff would be more a buy, renovate, get bank revaluation, use equity as a deposit on another place…. and hang onto the original place as well.

In Australia there is no tax on inherited property. But you could be up for tax on any future growth in the property. The tax issues around this are complex and it will depend on a lot of things such as:
PreCGT property v post
Investment v main residence
use of the property after inheritance etc.

eg property purchased prior to 1986 (or there abouts) will be CGT free even if it was a rental. But if you inherit a pre CGT property the property loses its CGT free status and you are taken to have acquired it at market rates at the date of death of the previous owner.

You should also look into your parents setting up a testamentary discretionary trust within their will, or giving an option in the will for form one, so that property passes to a trust. This will give you considerable tax advantages and considerable asset protection as well.