Hello all quick question Purchased a RP for $232K, several years later I refinanced for $350K and the RP became an IP. Sold property for $315K against an IP mortgage of $330K (at a loss) (been an IP for 6yrs) Question is, for Capital gains calculation purposes. Do I use the original purchase price or the refinanced price, currently reflected in the mortgage. Regards and thanks
The loan has no relevance for CGT Tax Tip 315: Loans and Capital Gains Tax Tax Tip 315: Loans and Capital Gains Tax
Thanks, I understand, I think. So purchase price is the only factor for consideration when doing calcs. I effectively re-purchased the property during the refinace for $350k??
I always suggest two calculations 1. CGT calc to determine what the tax is. Ignore what loan debt is owing etc. 2. The equity calculation. This takes the selling prices less selling costs and you deduct the tax estimate and the debt owing. This indicates how much $$$ you may be left with when its sold.
Hi again, House number 1, mentioned above, sold as decscribed, just prior to EOFY, so CG for the property was included in my last Tax submission.20-21 As it turns out, I paid zero CG, as the property value was calculated as in 2015,(when the property became an investment). I just had to get a bank valuation from 2015, which then enabled me to incur a CG loss of some $35k. I came out $3.5k in front from the sale proceeds. Keep in mind I still have $30k outstanding in the home loan to pay down, but that's fine I've got 26yrs to sort it. New question House number 2 has sold and will settle mid Sept. I will make a $50k profit on this property after settlement. The property has never been rented, or better description is, I have never earnt a cent from it in 12yrs. My question is, can I claim 12yrs worth of interest, insurance,lang tax, rates against my CG calculation, obviously to try and bring the taxable CG amount down.
It sounds like you were living in property 2 without claiming it as your main residence for CGT purposes so it will be subject to CGT. If so you could potentially use all those expenses when working out the cost base and this will reduce CGT
Not sure what that means. The CGT issue is realy whether it (ever) meets a CGT exemption where used fully or partially as your own home. If not, then it is subject to CGT and third element costs incurred can add to the costbase provided you can substantiate these. Aftre so many years I recently had a ATO enquiry into a CGT calc that included these costs and they wanted some evidence of the major ones eg interest, rates and maintenance. Client has excellent cloud storage and records going back.....I recall about 6 + years. ATO also confirmed they did a check of tax residency as it fairly common for people who are non resident to leave a property and maybe have a relative stay there for no rent. Also take care if you were living in a spouse property as this issue affect both their property and yours for CGT purposes. ATO asked questions about where they lived and who with to address that.
I have never lived in the property, ,it's on the other side of the country from me. I don't believe it meets CGT exemption. Hence I'm exploring how to reduce the CGT amount down. No spouse, no relative lived in it. Although it did have a caretaker that paid zero rent. Because the property has been an investemnt since I purchased it, that returned zero income, I'm asking whether all running costs incurred can be used to reduce down the CGT amount.eg: Interest, Rates, Insurance, Land tax etc.
This is a great example of where 3rd element costs should have been diligently recorded all the way through. The strategy of a caretaker and land tax concessions (NSW at least for 6 years) is wise. However if you were non-resident at any time in the period of ownership this may be different. The nature of what the caretaker did pay or costs they met should be explored by a tax adviser. s118.192 doesnt refer to rent to force a reset to the costbase. But if the property was never ever a main residence that may be a non issue. RUNNING costs arent third element costs. Ownership costs are. eg Rates but no garbage charges, insurance for building not contents, water rates excluding useage charges etc. Maintenance and enhancements, rates, interest etc that havent been claimed as a deduction may be eligible. Ignore depreciation.
