Assistance with CGT calculation?

Discussion in 'Accounting & Tax' started by tamu, 15th Feb, 2020.

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  1. tamu

    tamu Member

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    Hi, I have a question on CGT which I am hoping some of our forum members would be able to assist me with.
    1) We purchased home in combined name in 2009 in $330,00 and lived on it as our PPOR until 2012.
    2) We bought a new house and moved into living in new house from 2013 and have been using this as investment property since 2013
    3) We sold the house in Feb 2020 in $550,000
    How would the CGT be calculated in our case? Would 6 year exemption period work in here?
    Thank you in advance for your response.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    You could potentially use the 6 yearbrule.

    Seek tax advice
     
  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Yes most likely. However s118-192 will impact the costbase as it would reset at 2013 to the market value at that time and THEN the resulting gain needs to be apportioned between the exempt (6 years) and the taxable elements (the excessive days). There is also the issue of the new property to consider. The choice to use the 6 year rule will add tax to the new home and it may be worth to consider the two options You also need to understand what 3rd element CGT costs are and retain evidence.
     
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  4. tamu

    tamu Member

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    Thank you Terry and Paul for your responses. My accountant suggested 6 year exemption is not applicable as we have purchased and moved to new house.
     
  5. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Your accountant shouldnt be suggesting. They should be advising you on the options.
    Based on the OP they are wrong.
     
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  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    I have seen accountants who have misunderstandings about this cost people money. I had a friend who sold a house with a large capital gain and he told me his accountant worked out the CGT and he would have had to pay xxx. I did a quick calc on the back of an envelope and found out the accountant was wrong and saved him $25k in tax.
    He went back to the accountant who said I was wrong. I put it in writing on my law firm letterhead and my mate said he just accepted the accountants position because he didn't want to cause any problems with the ATO. I pointed out that he had calculated it wrong and was paying $25k more tax as a result.
    This is the same guy who gets his 13 year old daughter a kids meal so he can save $2 (he worth about $20mil too)
     
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  7. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    I have a client told he couldnt use his accumulated tax losses from 20 year offshore to offset his CGT. The difference was $60,000 in tax. And then they told him the CGT was not eligible to any 50% discount. I advised on getting a May 2012 valuation and that saved another $100K. In the end he paid $0 tax and still had losses. I called the franchise shop and found his "adviser"was unqualified. Sadly this is legal. Still a PI risk but legal.

    I used to run education seminars on tax for accountants, lawyers and financial planners and for CAs, CPAs, Tax Institute members. I can appreciate how few of them are property tax savvy.
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    where big money is involved it is certainly worth paying for a 2nd opinion
     
  9. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Or save money and get the right one the first time. :cool:
     
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  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    But how does the non-initiate punter know what they are getting is the correct answer.
     
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  11. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Yeah I find that disturbing. But when someone comes to me on something I dont work with I tell them and refer to someone else. And like you terry you tell people you dont work in family law etc
     
  12. tamu

    tamu Member

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    Thanks Terry and Paul for your advice on the topic.
     
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