Join Australia's most dynamic and respected property investment community

Need an accountant who knows CGT

Discussion in 'Accounting & Tax' started by balwoges, 11th May, 2016.

Tags:
  1. balwoges

    balwoges Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    188
    Location:
    Lake Macquarie
    I think my accountant has stuffed up regarding my CGT and need a second opinion on same in Newcastle, anyone ... ?
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,147
    Location:
    Canberra and Sydney
    This should be accountancy 101.

    Hit up @Paul@PFI from here. He's in Syd - but it is 2016 so you should be able to do everything via the net/phone.

    Cheers

    Jamie
     
    MTR likes this.
  3. balwoges

    balwoges Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    188
    Location:
    Lake Macquarie
    Thanks, will do.
     
  4. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,430
    Location:
    Perth, Melbourne, USA
    it's also a good idea for you to understand the basics of how it works. I like to do my own estimates and have been surprised how close My numbers were to accountants.

    Also Google it, I think ATO has lots of info on it
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,384
    Location:
    Sydney
    I do a fair number of reviews. Some good, some bad. A second opinion can be a good idea when big $ are involved. Often is easy to address / explain.

    I saw a shocker a few years back on SS. Difference in tax positions was $300K. So many errors....eg No CGT discount (as they were non-res) but nobody considered a valuation to access the discount, accum tax losses werent offset v's gains etc....For me a warning sign can be some franchise agencies. No always some are very very good.
     
    Perthguy likes this.
  6. wogitalia

    wogitalia Well-Known Member

    Joined:
    28th Oct, 2015
    Posts:
    871
    Location:
    Perth
    Anyone in the property game really should take the time to learn how to do this, CGT calculations 9 times out of 10 are a very simple calculation with little technical gibberish to get lost in. Of course that 10th one can be a bitch!
     
  7. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,384
    Location:
    Sydney
    I dont agree - Like suggesting all medical issues are simple and 9 out of 10 can be fixed with a tablet. Property CGT issues can be far more complex than a basic share buy / sell.
    Just look at the number of posts on SS / PC that ask so many questions about individual aspects. CGT tax reference books are a stand alone publication in the world of tax.

    Residency
    Main Residence Exemptions and concessions (ie absence)
    Valuation / cost base rules
    "Special Rules"...The expression used frequently in tax law.
    CGT event rules
    Special CGT events
    Cost base - 1st, 2nd, 3rd elements
    Cost base adjustments
    Discounted gains
    Marginal tax rates / strategies and timing issues
    Offsetting losses v gains
    Ineligible losses
    etc etc

    eg : Fred buys land intending to build a home in 2010 and completes build in August 2015. He moves in and decides to sell in September and land a buyer in days. Is it exempt under the main residence exemption ? No. It is subject to CGT pro-rata rules. The land will have a long period of tax (pre-residence)

    eg : I buy a house in 1990 and RMS NSW advises it is being acquired for a new railway project. Their price seems fair. I take the proceeds offered and buy a further property which I choose to then live in. What is the CGT position if I have already claimed huge depreciation deductions since 1990. A : A rollover event applies so there is no CGT taxable event BUT...The rollover will affect the costbase of the new property - One day when its sold it will be taxable. The QS deductions are ignored and dont reduce that costbase.

    I just realised that the second example has a technical issue. s118-192 which applies when a property first earns income?? If I later rent that property out ....which rule prevails - Rollover affecting the costbase or the special rule ??
     
    Nick Valsamis likes this.
  8. wogitalia

    wogitalia Well-Known Member

    Joined:
    28th Oct, 2015
    Posts:
    871
    Location:
    Perth
    I stand by the comment, you just named the 1 out of 10s as examples. Maybe it's closer to 7 or 8 but the majority are "X bought a property, rented it for the last 5 years and then sold it"

    A lot of the stuff you've mentioned goes far beyond calculating the gain on an individual property but anyone in property should be able to get close on the majority of transactions without too much time.
     
    MTR likes this.
  9. balwoges

    balwoges Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    188
    Location:
    Lake Macquarie
    In my case the ATO stated I am elegible for 15 year exemption - capital gains tax concession for small business as I meet all the criteria, seems my accountant has not taken this into account. The ATO also puzzled by my having to pay CGT on our business when my husband passed away.

    PS Am well aware of the complexity of tax laws and am hoping this time the ATO is right.
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    Yes it will pay to get a second opinion. Death is generally not a CGT event.
     
  11. wogitalia

    wogitalia Well-Known Member

    Joined:
    28th Oct, 2015
    Posts:
    871
    Location:
    Perth
    You need a new accountant if they're missing something as simple as that, missing something that major but simple would be a non-negotiable leave at all costs scenario because a graduate accountant should pick up on something like that!
     
  12. balwoges

    balwoges Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    188
    Location:
    Lake Macquarie
    Thought I had better clear up my tax situation for the education of others.

    My accountant is right :eek: seems that I had what is called a 'Passive Investment', i.e. an entity which derives all its income from rent - which means I dont qualify for the 15 year exemption Capital Gains concession.

    Despite dealing with 12 tenants and doing all the work necessary to manage my industrial units from cleaning to lodging BAS forms for over 20 years it doesnt qualify as a small business, this is despite the fact I had an ABN and was registered for GST.

    The ATO won this one :(
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
  14. balwoges

    balwoges Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    188
    Location:
    Lake Macquarie
    Yes - unfortunately.

    I also wish I had thought through the timing of the sale of the property, sold in May, if I had of waited until the beginning of July of the next financial year when I had very little income I would have been a lot better off!
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    Yes timing is important - but at least now you know for next time.