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CGT liability year

Discussion in 'Accounting & Tax' started by Toon, 25th Aug, 2015.

  1. Toon

    Toon Well-Known Member

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    Can anyone confirm if this is correct - you have to pay CGT for the tax year the contract was entered into rather than the year the money is received on settlement, regardless even of when the contract goes unconditional? I just settled a couple of weeks ago on a contract entered into in February, however this didn't go unconditional until the 30th of July & I thought it may well fall over right up until then. I was thinking I had till next November to invest these funds & make a few $$$ but looks like the government wants it now :(
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    If you think that's bad you should read about earn out arrangements....Contracts based on a future value eg sale of a business. The CGT must be paid based on the worst case valuation and amended when reality bites later.
     
  4. Toon

    Toon Well-Known Member

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    Thanks Paul, it is as I thought, it just seems completely illogical - though not as illogical as the earn out arrangements you outlined in your next post!
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    There is a logical reason. Revenue. The onus is on the taxpayer to stump up the tax. Upfront. Its a reason why they want a withholding tax on some property sales like in USA.

    Tax laws aren't always fair - Ask anyone aged 65 or over on the day they get a redundancy payout. They lose the tax free element...All because Wayne Swan suggested they would be retiring soon anyway !! (The High Court said it wasn't age discrimination if you ask). Compare the pair - One aged under 65 the other a month after 65th Birthday. Both worked for 35 years. One had $120K tax free. The other got $70K after tax.

    I'm just doing a series of 2013 CGT amendts for a client who had to stump up $60K way back. Now they owe him $10K. They will pay him interest (and then tax it :()
     
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