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How can I minimise CGT with CGL?

Discussion in 'Accounting & Tax' started by mmgg, 19th Sep, 2015.

  1. mmgg

    mmgg Member

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    Hi everyone,

    Over the past 10 years I have purchased a no. of investment properties. However when I started I was single and now I'm a family man and need a deposit for a family home myself. While I am confident some of my properties are CGT applicable I am also sure some are not and actually CGL. Therefore what is the best way to sell them and so walk away with the biggest deposit. I have been given some ideas like sell CGL first then CGT after to offset the loss.
    Thanks for everyone's advice in advance, naturally you are just advising which is the good faith I accept it in.
    Matt
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Are you saying some properties have unrealised gains and some unrealised losses?

    If so you might be better off to sell the loss properties first or in the same year as the gain property so the gain can be offset by the loss.

    If you sell a gain property first you will pay tax on it and if you later sell a loss (different tax year) then you will have a loss which is carried forward and of no benefit until you get another gain.
     
  3. mmgg

    mmgg Member

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    Thanks for that Terry. Therefore (correct me if it's wrong) the first place to start is getting an accurate assessment with an accountant as to whether I do have a capital loss or as you say unrealised loss. Also if I do lose say 5k and then sell a capital gain for example of 10k is that 5k directly put back into my pocket as cash....so I walk away with 15k. Which doesn't make the loss so bad.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    First place to start would be to work out the approx result - capita gain or loss on each property and then work out a sale strategy.

    No $5k will not be put into your pocket.
    say you have a $10k gain and a $5k loss this will result in a net gain of $5k. This is taxable on top of your other income So at most the $5k loss is only going to save you 50% of the $5k but more like 25% once a 50% CGT discount has been applied..
     
  5. Greyghost

    Greyghost Well-Known Member

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    I think really your question is just a cash flow question. I agree with Terry's response. Do not realise the cg first then the cl in later years as it will not be utilised and this quarentened for future cg.
    Good that you are planning this with some thought!!
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    1.. Ensure your CGT calculations are absolutely correct. Many taxpayers get CGT wrong especially cost base adjustments and improvements, depn etc.
    2. Then consider offsetting gains and losses and timing these so that you don't get a profit in 2016 and a loss in 2017 for example. Bettre to have a gain and loss in same year. They offset each other.
    3. Seek advice to ensure your numbers and plan work.

    I often ask clients what they plan to do with the cash....CGT is just tax. More likely the equity will be far larger than the tax bill and what you do with it becomes important. ie repay own home debt, super strategies etc.
     
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  7. mmgg

    mmgg Member

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    Okay thanks all for the suggestions. Would you believe someone has come forward to buy one of the houses but its cgt and not a loss. Now I'm stuck because its great to have a buyer but not on the house we want sold first. Hmmm! We do want the other houses sold the loss ones so what if we go ahead with the sale and then still try to sell the loss ones in the same year?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You still have about 8 months to try. Just work out the consequences if you cannot sell in time.
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I always suggest that clients look at this in two ways.

    1/ How much CGT will be actually payable... The first problem...then
    2/. Strategies to reduce it ? (ie other losses etc)
    3/ Calculate selling price less all selling costs and then deduct the tax and the debt payout so you know how much net cash you have left after the sale. If its a low number why bother selling unless its burning cashflow ??