Capital Gain/Loss Trigger Date?

Hi All,

I'm having a mid life crisis and considering liquidating everything, moving somewhere cheap with no PPOR mortgage and essentially throttling right back.

When selling an IP, what triggers the the CGT event, the contract of sale date or the settlement date?

Still just pie in the sky at the moment, but curious to know if I've missed the boat on selling one this side of June 30, not that I'm sure if it matters, I'd need to speak to a professional before we do anything so we can best work out the most tax efficient way of liquidating.

Cheers.

 

Contract of sale date is what I was told by my accountant

 

Thanks @Gockie I really need to go see a professional before we even contemplate selling down, we're both on good incomes so any sell off we'd be paying 45c in the dollar on any gains, I don't like the sound of that...

 

I feel what you're saying mate. Seems like we're just chasing a carrot year after year. Good luck with it all.

 

Yeah, @Biz - I crunched some numbers this morning, we started investing in 2013. At the time we were on track to pay our PPOR off by my 40th birthday (2 years ago) but we decided we could probably do better than that if we committed to an investment strategy instead.

Fast forward to now and on paper it looks like we've smashed the goal, but when I properly calculate everything out if we sold off taking all the taxes into account, we actually wouldn't be that much further ahead, and in fact, had we paid the house of 2 years ago as per the original goal and just saved our surplus cash for the last 2 years we'd likely be ahead of where'd we'd be if we liquidated everything right now.

The CGT is what's killing my numbers, it essentially wipes out most, if not all, of the "getting ahead" part,

I think I need to go see a creative accountant before I annoy myself any further.

 

Especially if you are living in Sydney and I'm sure Melbourne - the cost of living is seriously out of control and thats not limited to just housing.

 

To be honest @Shahin_Afarin I don't find our living costs all that bad where we are in Melbourne. Our monthly expenses haven't changed all that much for the last few years.

What kills me is when I look at the gross value figures in my portfolio, at first glance it looks like we could sell off the IP's, sell the PPOR, buy a cheaper PPOR outright with no mortgage and have a big chunk of change left.

When I do the net figures properly though, selling fees, capital gains tax, stamp duty on purchasing a new PPOR etc we'd basically have to buy something worth half of what our current PPOR is, then have no asset base left aside from the new PPOR and the actual impact on our monthly expenditure would be negligible as, although we'd have no mortgage, our current mortgage isn't that big anyway, and although we'd lose all the IP debts we'd also lose the income from them.

It's such a stark difference between looking at your gross asset base and then sitting and actually working out your net numbers, pretty sobering. It really makes it look like the last 5 years hard work, sacrifice and stress hasn't really been worth it at all.

The capital gain tax is the killer for us at this stage whilst we're both earning full time wages. We'd be better to take a year off each and sell down in a year that we have no other income. Net result would be similar but at least we'd have had a year off work.

 

I've thought like this too.
At least it's an option. Go study something or travel but I think its like spending the profit.
In this way, shares are better. It's not all or nothing.

 

At least this is true:
"Individuals and small businesses (excluding companies) can generally discount a capital gain by 50% if they hold the asset for more than one year."
Working out your capital gain or loss

 

Yeah @Gockie , even wit the 50% discount it's still heart breaking, I'd factored that in already.

Wouldn't mind so much if we could sell our place and buy another PPOR without stamp duty, we could just about do what we'd like to do if not for that. In the last 8 years we've paid stamp duty on 6 houses. brings tears to your eyes.

 

The CGT event date is generally the contract date.

If the contract has a condition precedent this is not the case. And some taxpayers, like developers, use the settlement date because they are in a different position.

Don’t forget superannuation as a strategy.

 

Thanks @Ross Forrester - intrigued to know more about what you mean by using Super as a strategy?

We both have ordinary Aus Super funds and we've already put the max allowable in this year each.

 

So putting in the max is the main one.

You could also look at the downsizer super contribution.

 

Just Googled that, looks like you have to be 65 or older? I'm 42.

 

Can you pre-pay Super for future years? Or better still, retrospectively top up Super for previous years where we didn't put in the max?

 

Practically you can only do this for the 19/20 financial year for concessional contributions.

Other tests as well.

 

Propagate - come buy some land in the Latrobe Valley and chill out. You know you can get work down here!!

 

Could you sell the main residence CGT free?
Move into an IP perhaps.

Sell the business? Lots of CGT concessions available.

 

Oh man, don't tempt me! Bright is top of the list at the moment but prices have gone up a fair bit now, don't think we could pull it off just yet.

@Terry_w The IP's are all interstate, the main residence would be CGT free. The business will be kept for the next 5 years at least as art of any plans, the only real buyer would be my business partner and he's skint. The business has a lot of potential for great income moving forward, we have just increased staff and capacity so I'd be loathed to walk away from it just as we're starting to kick some goals. I would like eventually to throttle right back from it though, whether that's sell out my share and just work there as an employee or step back as a silent partner. The latter idea I don't like so much as I'm still carrying liability risk then for any issues the guys might create.

 

You could potentially sell the business to another entity you control to free up cash and debt recycle.