Newbie Question on CGT

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craig123
Participant
@craig123
Join Date: 2012
Post Count: 27
December 17, 2013 - 8:19 am
Hello,
Sorry for the basic question but it hurts my head to scroll through the ATO website.
If I move into my IP, (bought in 2010 and rented out ever since, negative geared) for 6-12 months. Does that affect CGT in any way when the property is sold?
Also just roughly how much CGT would you pay if for example property price when bought was 290K and sold 5 years later for 330K?
thankyou
Craig
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
December 17, 2013 - 9:27 am
Yes it would.
Ignoring the fact that you live in it
If you sell for a $40k gain CGT would be at most $10.
First you take off all associated costs. say $6k
Reduces the gain to $34k
apply 50% discount = $17,000
This is added to your other income.
If you didn't have any or earned about $3k, tax could be nil
If you were on $180k pa the tax would be $7650 or so.
—
If you live in a property that has been rented then you could apportion the CGT on a time basic.
So if held 5 years and you lived in it for 1 year then maybe 20% of the gain is tax free.
CHeck with your accountant
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Ryan McLean
Participant
@ryan-mclean
Join Date: 2010
Post Count: 547
December 18, 2013 - 5:47 am
As Terry said my general understand is that Capital Gains Tax is paid of the increase in value on the property minus associated costs (eg. selling expenses).
What you pay depends on
1. What percentage of time it was an investment
2. What tax bracket you are in.
So if (as Terry said) you profit $34k after associated costs then you next need to look at how long it was an investment for
100% of the time – Then the full $34k is added to you annual income
75% of the time – $25.5k is added to your annual income
50% of the time – $17k is added to you annual income
25% of the time – $8.5k is added to your annual income.
Next you need to look at what tax bracket you are in.
The first $18k you earn in a year is generally tax free and any income over $180k is usually taxed at the highest rate (I think 45% + medicare levy etc).
So now its time for you to go away and do the figures.
Hope that helps.
ps. Always get professional financial and taxation advice. This is not to be consider 'advice'
Ryan McLean | On Property
http://onproperty.com.au
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