Capital Gain Tax Calculation for Investment Property turn into Main Resident

Lcraykuo on 01/03/2019 - 09:20
Last edited 01/03/2019 - 12:42

Hope can get some help with the CGT calaution for the Investment Property turn into Main Resident,
will certaily also get a registered tax practitioner but stil want to get more understanding prior talking to the accountant.

Following is the key date the figures:

  1. Purcahse property on 12-Jul-2012, purchasing price 650K, stamp-duty 25K, leased to goverment
  2. Leasing end on 21-Nov-2014, we moved in the proeprty as main resident
  3. The valuation report valued the property as 800K on Nov-2014
  4. We live in the property till it sold on 12-Jan-2019, the sold price is 1.1M , sales agent and marketing fee is 25K

How should we calculate capital-grow:
a. Use Nov-2014 valuation report : 800K- 650K - 25K - 25K = 100K capital growth
b. Use sold price and pro-rata method : (1,100K - 650K ) * 0.36 - 25K - 25K = 112K capital growth
c. Or other way?

Thanks for help, cheers.

Financial

Comments

  • [Deactivated] on 01/03/2019 - 09:29
    +9

    What did the tax accountant say?

  • GG57 on 01/03/2019 - 09:31
    +1

    The date in point #4 is most likely not correct?

  • diceman99 on 01/03/2019 - 09:34

    Your Dates dont make sense:

    Purcahse property on 12-Jul-2012
    Leasing end on 21-Nov-2014, we moved in the proeprty as main resident
    We live in the property till it sold on 12-Jan-2012

    • theHMASfriendship on 01/03/2019 - 09:37
      +6

      He might need to get a ruling from the ATO, as there probably isn't a precedent set for the use of time machines in CGT calculations

      • diceman99 on 01/03/2019 - 09:38
        +3

        Were you leasing the property to Sarah Connor?

      • Some Guy on 01/03/2019 - 10:12
        +3

        The purchase and running costs of the time machine would be tax deductible presumably.

        • theHMASfriendship on 01/03/2019 - 10:15
          +2

          Proportioned for income earning vs private usage of course.

  • [Deactivated] on 01/03/2019 - 10:05
    +5

    till it sold on 12-Jan-2012

    On the assumption you sold in 2019 and that you are in the highest tax bracket my calculated total for cgt is $66,237.54.

    I have pm'd you my invoice. Use code TB_THE_TAX_MAN for 5% off and don't forget cash rewards.

  • Ocker on 01/03/2019 - 10:16
    +1

    Purchase price $650k plus stamp duty of $25k gives a cost base of $675k
    Valuate as of Nov 2014, when you assumed residence $800k
    Give you a CGT liability (at your marginal tax rate) of $125k

  • craykuo on 01/03/2019 - 12:42

    Sorry it was sold on 12-Jan-2019

  • denz02 on 01/03/2019 - 12:49
    +1

    Because you rented the property at the start the valuation when you moved in is irrelevant. So the first step in the calculation will be the number of days from the date of purchase till the date you moved in divided by the days you own the property that will give you the percentage you times that by the difference between the purchase price plus the ownership expenses while you lived in the property and the sale price that will give you the capital gain and because you owned it for more than 12 months you will get the discount.

    Your cost base would be 650k + 25k plus all the ownership expenses you paid while you lived in it so that includes rates, interest

    sale price is 1.1 less sales agent and marketing fee

    With things like this you should see your accountant this is not the thing you should be doing your own tax return through mygov.

  • jcp123 on 01/03/2019 - 13:53
    +1

    just looking at the raw figures you've given, here's a rough outlook (this does not include cost base increases due to rates/fees/insurance/solicitor/conveyancing/etc)
    days owned = 2375
    days rented = 862
    862/2375 = 0.3629 (36.29%)

    CG = 1.1m - 25k -25k -650k = 400k
    50% CG discount = 200k
    CGT amount = .3629 x 200k = $72580
    Tax = $72580 x your marginal rate
    Assuming this puts you in the highest tax bracket, your tax debt will be approx $33k

    Be aware you must pay this debt by 21st November 2019 if you are lodging yourself(as it is not coming out via PAYG).. you may get a bit more leeway if registering with a tax agent, but you should register as early as possible…if you don't pay it by that date they charge you general interest charges at around 9% per annum. i got stung by this last year.

    • diceman99 on 01/03/2019 - 14:13

      I think you will also have to add back on any Depreciation you may have claimed on the property.

  • diceman99 on 01/03/2019 - 14:06

    I'm presuming that if you owned it jointly with your Wife then the $72580 could be split among you so $72580/2 = $36290 each added to your Total revenue for the year.

    Husband Tax = $72580/2 x your marginal rate
    Wife Tax = $72580/2 x her marginal rate

  • craykuo on 01/03/2019 - 14:35

    Thanks everyone, really appreciate for the help.

    To wrap it up; the CGT Tax = ($72580 + Depreciation) x marginal rate , the amount could be split if it's joint.

    I was under the impression Nov-2014 valuation - 800K - could be used to reduce CGT but it can't be used.

    I will register with a tax agent as soon as possible.

    Once again thanks for everyone's help. Cheers

  • craykuo on 01/03/2019 - 17:34

    According to ATO website, seems register with a tax agent could be done anytime before 31 October

    https://www.ato.gov.au/Individuals/Lodging-your-tax-return/L…
    Due dates for lodging tax returns
    Most registered tax agents have a special lodgment program and can lodge returns for their clients after the usual 31 October deadline. The due date will also depend on your personal situation. Contact your tax agent for advice.
    If you're using a tax agent for the first time, or using a different tax agent, you need to contact them before 31 October to take advantage of their lodgment program due dates.

  • Manunited on 02/03/2019 - 09:19

    Without knowing the ins and outs of the circumstances of the sale. The 6 year absence rule should apply and the property could be treated as your main residence and be CGT free.

    • craykuo on 02/03/2019 - 20:35

      Thanks for the help.
      The property was rented (as it was purchased with leasing contract), so I don't think 6 year absence rule applied.

  • Manunited on 02/03/2019 - 09:21

    jWith regards to lodgement dates, you can register with a tax agent at anytime and our due date for the completion of 2018 tax returns is the 15th of May 2019.

  • Ashbargin on 02/03/2019 - 09:21
    +1

    Capital gain = $650,000 + $25,000 + legal costs etc + capital expenditure - depreciation - valuation $800,000 so approx $125,000

    Capital gain x 50% as you owned it for more than 12 months

    = Approx $62,500 taxable gain this income is added to other income and is taxed at marginal tax rate. If owned proportionally multiple this by proportion.

    1 owner assuming $90,000 of other income tax would be approx $62,500 x 39% = $24,375

    It should be noted I have assumed you have no other main residence you are claiming.

  • Ashbargin on 02/03/2019 - 09:28

    It should also be noted that if you have of lived in the property first then rented it out for 2 years then moved back in and sold now it would have been CGT exempt. A little bit of planning first with a financial planner or accountant can save a whole lot of money. Now of course that may not have suited your lifestyle and that is a different issue.

    • craykuo on 02/03/2019 - 18:35

      Thanks for the help.

      The property got a leasing contract when we bought it so the only option for us is to wait till the leasing end before we can move-in.

      In regards of capital gain, since it was rented since day 1, my understanding now is that the 800K valuation is irrelevant?

      • Quantumcat on 02/03/2019 - 23:46

        I don't think a valuation ever comes into it cause you could just get someone to value it in a way that helps you - only the actual buy and sell prices count (but IANAA)

  • Telcius on 05/03/2019 - 11:47

    You should speak to an accountant for some certainty as opposed to being confused by some of the guesswork in this thread.

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