selling property - agent commission fee and marketing cost

1. When I sell a property, are the agent commission fee and marketing cost relating to the sale capitalised or deducted to the current year income? How the CGT is calculated? For example:

Sale price $500K
Acquire cost $280K
Marketing and agent fee: $20K

Proceeding from sale: $500K - $280K -$20K = $200K
CGT discounted i.e personal tax rate=37%: $200K x 37% / 2 = $14,000

Is it correct?

2. If I withdraw from sale, how will the marketing fee be treated. Can it be deducted to current year income or capitalised?

 

Wont be 37 though.

 

Cost base expense. Your calcs wrong too

 

I would highly suspect that the calculations are overly simplistic and require tax advice. Its common to find issues:
- You didnt allow for the acquisition costs eg legals, fees, BA fee, duty etc
- You didnt adjust the costbase for depreciation / cap allowances claimed while woned
- You may not have considered third element CGT costs if there are any
- Selling costs affect the costbase
- Date acquired / sold
- Your residency position
- Other income as this impacts your marginal tax rate
- Possible other effects such as Medicare levy, surcharge, Div 293, HELP debts etc

A simple (I would argue too simple) example is here : Selling a rental property

If the property isnt sold and is withdrawn then the marketing / auction cost may be deferred and factor into a later calculation when the property does sell.

 

Is there a timeframe expiry on this @Paul@PFI ?
Eg: If a vendor tried to sell but was unsuccessful 2 years later, are the marketing costs still counted?

 

No time limit applies.

 

Good to know- thankyou

 

i believe it does.

The second element of the cost base and reduced cost base consist of incidental costs incurred to acquire the asset, or that relate to a CGT event that happens in relation to the asset (subsections 110-25(3) and 110-55(2) of the ITAA 1997). Incidental costs are listed in section 110-35 of the ITAA 1997. Subsection 110-35 advises that if a CGT event happened - cost of advertising to find a buyer can be included in the second element of cost base for CGT purposes.

If you had attempted a sale that was unsuccessful and you have taken the property off the market it would be considered that there will not be a sufficient connection between those prior advertising expenses and any future CGT event that may happen in a future year, from a new attempt to sell the property. The ATO would argue that they don't relate to the CGT event that has occurred later on. the words "relate to" are very important.

Some private rulings confirm that. Time is an important issue to consider.

 

Ah thanks Michael. I'll flag it with my accountant then- appreciate your contribution here.

 

Yes, I recall seeing a PBR along these lines.
The ATO search function for the PBR register does not seem to be loading anymore.

 

they have incorporated it as part of the ATO law database now

Legal Database

 

Ah yes....I stand corrected. Good post

 

Lets take a picture and frame this!

 

I thought I was wrong once...But I was mistaken

 

I found this in my notes:

PBR Authorisation Number: 51959

https://www.ato.gov.au/rba/content/?ffi=/misc/rba/content/51959.htm

“In your case you abandoned your attempts to find a buyer. A CGT event has not happened in relation to the asset. You are not going to advertise again for some years until the market improves. Furthermore, as this attempted sale was unsuccessful and you have taken the property off the market it is considered that there will not be a sufficient connection between your recent advertising expenses and any future CGT event that may happen in a future year, from a new attempt to sell the property.

Question 5

Therefore you are not entitled to include the marketing expenses for an attempted sale of a property, in the cost base of the asset for CGT purposes, where you have taken the property off the market and where you may not attempt to sell the property again until a future year.”

 

Of course that link no longer works.
Here is the new link
Legal Database

 

I am selling an IP and found the topic very informative . Is the interest claimable as a tax deduction whilst the property is for sale . I am planning to sell with a vacant position (no tenants present ) .
What is a balancing adjustment ?
I have depreciating schedule from BMT . Can the unclaimed depreciated assets be added to the cost base ?

 

Only if the property is rented. It has to relate to income to be deductible

 

Thanks Terry.
What is a balancing adjustment ? And can the unclaimed depreciating assets be added to the cost base?

 

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