Intentionally realize capital gains/loss

Discussion in 'Accounting & Tax' started by Oatbran, 14th Feb, 2018.

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  1. Oatbran

    Oatbran Member

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    19th Aug, 2016
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    Perth
    Hey all!

    I'm trying to think of ways to intentionally trigger a CGT event at the lowest cost (and complication). Thoughts would be much appreciated! I would like to understand my options (if any) prior to seeing an accountant to discuss implications in detail.

    Background:
    - Bought apartment in South Perth in Sept '15 with FHBG for 400k
    - Lived in it until June '16, after which I changed intent of property from PPOR to income producing,
    - Just moved back into it Feb '18.

    Over the time at which it was income producing, the market has gone down (duh!). I have a desktop valuation at the point it was income producing from CBA (lender), and I just got another desktop valuation completed. As expected, the recent valuation came in at under the initial valuation. I haven't done the exact cost base calculations yet but intuitively it would be a loss in excess of 20k, so tax return would be pretty high if this loss was realised. Are these valuations sufficient or do I need to get proper valuations carried out? Surely it is acceptable as these are what the mortgage is based on?

    I want to realise a capital loss this financial year on the property as I am starting my own business and the tax return would be immensely useful. I can possibly transfer ownership or do joint ownership with my girlfriend to trigger the CGT, but I haven't looked into stamp duty / costs associated with this. Any other ideas?

    Thanks so much!
     
  2. Trainee

    Trainee Well-Known Member

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    Dont understand. Why is a capital loss useful?
     
    Terry_w likes this.
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Sounds like it is a main residence which was rented out - the cost base would be the value at the date rented, so if you trigger anything there could be a capital gain.

    if there was a capital loss, and you could trigger it, this would not help you save tax as a capital loss can only be used to offset a capital gain.
     
    Ross Forrester likes this.
  4. Oatbran

    Oatbran Member

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    Ah, for some reason I thought I could offset capital loss in property against my income, unlike shares, but i guess they are both assets so same rules apply... I don't have any capital gains to offset so that's not gonna help me then.

    Sorry, ignore my question! Thanks for the help anyway! :)
     
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  5. Marg4000

    Marg4000 Well-Known Member

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    No, you can’t offset a capital loss against income, but you can declare it and carry it forward to offset a future capital gain.
    Marg
     
  6. Ross Forrester

    Ross Forrester Well-Known Member

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    You could consider the future growth prospects of south perth apartments.

    One option is to sell and buy in an area with more land content. You would live in it and move out and and then use the main residence exemption to keep it free of future cgt while renting it. You could then rent and live in an area you like.

    This will involve stamp duty and sale costs - so some financial modelling is needed. But it is another option for you to consider.

    I am just concerned about the volume of new apartments planned or coming on stream in South Perth.

    But if you were going to do this you might want to do so before you start a new business. Banks historically do not like new business in terms of lending - but the mortgage brokers here can cast better light on this.
     
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I believe the loss is exempt and unless you can choose a main residence exemption elsewhere you are bound by the main residence exemption. The MRE absence rule is relevant.

    There would be no CGT loss. Just a reset lower costbase for a new owner (partner) and costs to transfer title and refinance etc