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Capital losses

Discussion in 'Accounting & Tax' started by the world is your oyster, 21st Sep, 2016.

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  1. the world is your oyster

    the world is your oyster Well-Known Member

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    hi I was wondering if someone could help answer this I have asked my accountants Iam waiting on a response but thought I would ask on here also

    My situation is I just sold a house in Melb and with the sale funds I paid out that loan and also two other loans attached to a property in Gladstone 95k in total for the Gladstone loans
    55k was used for deposits and stamp etc and 40k was a loan I had to get apon settlement the value was short by 40 k so I had to get a extra loan to bring my LVR down to a lower level !! Are these losses classified as a capital loss and can be carried forward to off set a capital gain ?

    Kind regards daniel
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you mean you sold the Gladstone property at a capital loss then this could be carried forward. Loan amounts don't have anything to do with capital losses though.

    You have to look at the sale price and see if this was less than the cost base.
     
    York likes this.
  3. the world is your oyster

    the world is your oyster Well-Known Member

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    victoria
    Ok that makes sense
    Be great if it worked out now
    Thanks for that so I guess I keep a record of loan statements etc
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Perthguy and JacM like this.
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I'm often asked by clients to advise on the CGT issues with selling property. I suggest you look at it two ways.

    1. CGT. How much CGT is payable and how will this affect the proceeds after sale ?
    2. Debt. When the CGT is known then look at the amount of cash the sale releases and then deduct the CGT and any loans that will be paid out.

    Example :Fred has a IP which he plans to sell. The selling price is $600K. The CGT payable is $Nil since the property was once his home until 5 years ago. Fred has used the main residence absence exemption . Fred's loan of $100K will be discharged when the property is sold. $500K will be available after the sale.

    Now compare this to Mary who also is selling a $600K property. Her CGT is $150K and she owes the bank $350K. So when she sells she would receive under $100K after paying out the loan and paying the ATO. Her property is cashflow +ve by $10K a year. She will lose that $10K a year all for a once off $100K outcome.

    Mary may be less likley to sell v's Fred. I often see people consider selling but the sale wont release much equity and their cashflow position is fairly square. Unless there is a change in financial position it may be better to hold it rather than trigger a load of costs.