Question around CGT & Stamp duty in ACT

Discussion in 'Accounting & Tax' started by JamesDean, 5th Mar, 2018.

Join Australia's most dynamic and respected property investment community
Tags:
  1. JamesDean

    JamesDean Member

    Joined:
    23rd Jan, 2016
    Posts:
    10
    Location:
    canberra
    Hi all,

    Background
    - bought an OTP apartment due to be settled end of 2019, last year in March
    - ticked the box which says this will be an investment property (i already have a PPOR).
    -paid my stamp duty already

    I am looking to onsell the apartment before completion due to unexpected events and would like more liquidity.

    Questions
    - I have heard that if i signed the contract last year, I am still eligible for 50% CGT reduction (if there is even any CGT). Is this valid?
    - The stamp duty that I have paid, would i be eligible to claim a tax deduction on this? (ACT property)

    many thanks in advance, if this is an inappropriate question, would it be best to get a private ruling?
     
  2. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,673
    Location:
    Australia wide
    - perhaps
    - yes
     
  3. Paul@PAS

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

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    - Perhaps
    - No

    You cant claim a deduction for stamp duty in the ACT as you havent acquired the property and it doesnt produce assessable (rental) income. Therefore the duty which may be deductible to an investor (only in the ACT) isnt as you arent an investor. The duty may reduce the CGT profit
     
  4. JamesDean

    JamesDean Member

    Joined:
    23rd Jan, 2016
    Posts:
    10
    Location:
    canberra
    Makes sense, so to confirm. I would need to settle the apartment, put it on rent for a certain amount of time (generating rental income) and then i would be able to claim that stamp duty cost as a deduction
     
  5. Paul@PAS

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

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Yes, same with interest if you pay interest on your deposit etc. Legals on acquisition and sale etc.

    The value is eroded by 50% as the CGT profit is first reduced by the tax then only 50% taxed.

    Its what it is. A tax deduction is only available for costs incurred in the production of assessable income. CGT gains dont meet that test.

    This all assumes your change of heart was unexpected of course. If your original plan was to buy and flip then the whole of the profit is not eligible for a 50% CGT discount.
     
  6. JamesDean

    JamesDean Member

    Joined:
    23rd Jan, 2016
    Posts:
    10
    Location:
    canberra
    Thanks for the detailed explanation, that definitely makes sense. Definitely a change of heart as i don't see there being much capital gains out of this purchase currently. I'll weigh up my options as the date gets closer.

    Thanks again for the response
     
    Mcube likes this.
  7. bunkai

    bunkai Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    858
    Location:
    Sydney
    I have always thought that deposit bonds are the way to go if you are buying OTP a long way out. Though maybe they are expensive.

    Unless you need your 20% liquidity right now, I'd wait and pray that there is enough CGT to cover the selling costs.
     
  8. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,673
    Location:
    Australia wide
    Deposit power in liquidation now
     
  9. bunkai

    bunkai Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    858
    Location:
    Sydney
    And Googling deposit power shows mandarin advertising on their website...

    Back to my interest only, deposit bond funded offshore property speculation theory... That should not have happened ... ;)