How best to offset my potential loss

Hi All,

I have an investment property in North Queensland which I am trying to sell. It is expected that if/when I sell it I will be in loss of about $60K. I have another property in Adelaide which if I also sold would probably net me about $60K.

I understand that if I sell both they can ' cancel ' each other out so to speak. Few questions :

Does this have to be both in the same financial year ?
The Nth Queensland one is already 2 months on the market but a bit of interest of late. The Adelaide one is not on market but I think would go fairly quickly.

Any suggestions on how best to assist my problem ?

Kind Regards

 

What has your accountant/tax adviser recommended?

 

I'm not a tax guy but.. you can usually carry the losses forward into future years - so don't have to sell them in the same FY

 

Hi

Waiting for accountant to get back to me . I assume it has to be in same tax year ? Going to be juggling act as i am not keen on letting a potential buyer slip away from the nth qld oroperty .

Thanks

 

If you realise the loss, you can carry it forward to a year in which you realise a gain.
But you can't realise a gain one year and use a loss in a subsequent year.

Conclusion: realise the gain at the same time or after the loss.

 

There is not much good news about a capital loss, but at least you can declare it on your tax return and carry it forward to offset a future capital gain.
Marg

 

Tax Tip 113: Applying Capital Losses against Capital Gains Tax Tip 113: Applying Capital Losses against Capital Gains

 

The issues with gains and losses is that a loss must carry forward and can be used later.
However, a gain isnt the same. So if you sell the gain first it triggers tax then the loss is of little use later

One catch of using prior year losses is the formula for taxable gains is that the gain is calculated and is first reduced by the prior (or current year) loss. Then the net gain if one is left may be halved if the gain asset was owned 12mths. If the gain and loss offset you lose the 50% discount benefit.

There is no reason to sell the gain property merely to use a loss.

The amount you think will be the gain / loss may also be incorrect. Selling expenses and some costs may change the costbase. It may be higher of lower than you think. And thats just the CGT.

You should also run the numbers on the cash available after (each) sale. Ie Total proceeds less selling costs less loan payout less expected tax. Sometimes the number is very different to the CGT issue and the net cash may be used to payoiff a PPOR etc. Or may be trivial and not worth the costs and hassle.

 

How did you go with this @Big Maan?