Join Australia's most dynamic and respected property investment community

Revaluing Properties

Discussion in 'Accounting & Tax' started by alexm, 6th Aug, 2015.

  1. alexm

    alexm Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    305
    Location:
    Sydney
    Hi there,

    For the accountant's out there, to help legitimately reduce CGT payable on property gains, is it possible to have the property revalued to reflect current market values?

    Example: Land is purchased 10 years ago which at today's prices, is worth more than the purchase price. Can a current valuation be used for the cost base not the original purchase price?

    Thanks
    Al
     
  2. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,279
    Location:
    Sydney
    Are you asking if you can use different figure other than your purchase price as your cost base?
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,400
    Location:
    Sydney
    No. CGT is calculated using a defined set of rules that refers to CGT events of different types. Each event has specific rules for the cost base.
    There are also cost base rules for determining what the cost base is.

    One issue with land is that it may become trading stock. When land becomes trading stock a CGT event occurs. The taxpayer has a choice of methods to value it. Cost or market...(If you use cost then the CGT = zero. If MV is used a CGT with discount may occur) So you can trigger a discount capital gain maybe. Then when its subdiv and sold ordinary income tax is less. However all that leads on to issues such as GST and margin scheme etc.

    Personal tax advice on your intentions would be a critical step.
     
    Be Developer likes this.
  4. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    903
    Location:
    Perth, WA
    I'm confused. Why would a current value be used for the cost base instead of the price you bought it at?
     
  5. alexm

    alexm Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    305
    Location:
    Sydney
    @Paul@PFI, Thanks for the information - it was as I thought. My accountant and lawyer are currently looking into this for me. The land may potentially be classed as trading stock (in line with other transactions of mine) so this could be a slightly different outcome.