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CGT on retain and build

Discussion in 'Accounting & Tax' started by chibs, 29th Jan, 2016.

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  1. chibs

    chibs Active Member

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    Hi All,

    I have just completed a simple retain and build. The plan is to hold both front and back. I have funded this project through a mortgage and also by forking out some cash out of my savings as I had hit my maximum borrowing capacity.

    What is the usual practice to determine the base capital cost for the project ? If I want to sell it one day, say 10 years from now, I'd want to minimise my CGT and at that time there is no way I'd be able to remember all the capital I've spent on the project.

    Do I get both properties evaluated ? If I get a bank to evaluate them, they'd use a conservative evaluation and that can't be advantageous for me.
     
  2. jrc

    jrc Well-Known Member

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    Your actual costs. Get everything together now, put it on a spreadsheet and take your invoices etc to your acciuntant and he can certify it, and you have it all on one sheet and don't need to keep the invoices
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Same information will be needed for QS reports too.
     
  4. chibs

    chibs Active Member

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    I don't have an accountant. Do I really need it certified ?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Value doesn't matter if the propety will be rented out.

    When you sell you will have the opportunity to use various costs to reduce the CGT payable. If you cannot remember what these costs were then you will pay more tax.

    Not sure what you mean by 'certified'.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    No. I always recommend that all CGT cost records be retained permanently by scanning them. The ATO could ask for these records in 20 years time (To be kept for 5 years after the year of the sale of the asset). A tax agent signed CGT record is OK for shares etc but for property there is no substitute for primary records. It will cost you to have a tax agent certify the CGT record and the complexities to it indicate its not a simple task..

    Good practice when undertaking any capital expenditure is to have a CGT folder for each property and add all costs that are non-deductible to this and even consider a excel record that can be continually updated as a summary. This would max the cost base and minimise tax at a future date. The excel should identify total build costs etc and then use a reasonable basis to apportion between the two lots. This may be area for land based issues and m2 for the build perhaps.

    Here is the complex ATO view on a certified CGT record : TR 2002/10 - Income tax: capital gains tax: asset register (As at 19 June 2002)
     
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  7. chibs

    chibs Active Member

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    Thank you for your helpful replies. Scan them I will then. I'm glad I live in the digital age :)