Just sold an IP and now looking to minimise tax

Just sold an IP in Sydney. To be pedantic, cooling off finishes today, but i'm expecting it to proceed.

This property has had an increase of 74% in just over 5 years and I am happy to lock it in and take that money.

So, thinking ahead, I do not want to pay more tax than I really have to. Two ideas come to mind but are there any other great ways I can bring down my taxable income?

• I am planning to put the maximum I can into super this year as a salary sacrifice to decrease my taxable income.

• I'm also looking at potentially prepaying future interest expense on other IPs before this financial year is over. However i'm sure that will cause more taxes to be paid further down the track, this is not something that can be done often. And if I earn a higher income in future years then I could lose the ability to minimise tax by prepaying interest again.

Any other great ideas to minimise taxes after selling an IP with good CG?
Unfortunately/(fortunately) I have no loss making assets to sell to offset against this gain either.

 

I'd be very happy with those returns too! Well done Linda.

 

You could stop working between now and end of june

 

True. Plan B? But my job doesn't suck and I like it.

 

Pay your CGT and wipe out Australia's deficit, all in one hit.

 

Take unpaid leave between now and June?
Can you buy something big pre-tax? Car? New laptop...

 

Wouldn't you plan tax reduction avenues BEFORE selling?

 

I've got no children and my partner has nothing to do with my investments (he wants zero to do with them) so I can't do any sort of trust distributions.
PS. I was originally planning to sell last financial year but I didn't want to take the CGT hit then.

 

What's your tax rate, did you live in it?

50% discount...

Max tax rate is 47%

47% of 50% of your capital gains, minus any additional capital expenses = <23.5%

Sounds like a pretty fair deal to me, especially given you had tenants in paying your loan presumably the whole time.

 

On a serious note, I have pre-paid interest on a (significantly large) IP loan. We did it a few years ago (had a really big year and the tax bill was rather large) and have continued to do so ever since.

We have been waiting for a low tax year. Due to recent investment transactions, this year should be the year. The interest is payable in early June. So, we will do some tax planning in late May and then make the final decision whether not to pay interest in advance or continue to do so.

I will be surprised if we do pre-pay the interest.

 

Hmmm... 4 day weeks and a looonnnngggg holiday could work. But would I want to start working again after that? That's a problem.

 

Super and Interest in advance are the big ones but any other costs you can bring forward all help. Any repairs due? Prepay insurance in June.

I assume you'll have multiple loans still after settlement so you prepay all of the interest on them this FY then cut one or two off over the next few years.

 

Will note to prepay insurance. Cheers

 

A big tax deductible donation (the SNM Benevolent Society for the advancement of Stephen Keen's theories on the 2017 Sydney Property Market Correction).

 

Lol

 

Today is Day For Daniel and the Daniel Morcombe Foundation would be very happy to receive a sizeable donation from you!

 

What's the max you can put in super to reduce your earnings. Is it 25k or 35k?

 

That's well done plus add the rental return over those years ,it's just a pity your are not invested in other area's,if you were invested in any high end bank as most are down over 20%,you could sell those at a loss to balance the profit..imho..

 

I've written a tax tip on minimising CGT
Tax Tip 119: How to Reduce CGT on Investment Property (Part I)

I don't seem to have posted part II but have already written it and will post soon,

See also

Tax Tip 32: Delay paying CGT and save interest

Tax Tip 76: Calculating the Cost Base for CGT purposes.

 

Waiting for part II then....
Cheers