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Tax Tip 32: Delay paying CGT and save interest

Discussion in 'Accounting & Tax' started by Terry_w, 29th Aug, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Another basic strategy which some may over look.


    Say you have sold a property that is subject to CGT. Instead of doing your tax return asap, delay it as long as possible so you can keep the money that you have to pay tax on longer. Keep it in the offset account attached to the non deductible home loan.


    Having $50k in an offset account for 6 months will result in about $1200 saved on non deductible interest. Not much but every little bit helps and this is 2 weeks after tax salary for some people. The 6 months may even be stretched out further in some cases.


    If you delay a sale until 01 July (exchange of contracts) then you may even be able to add on another year’s worth of interest.


    Unfortunately an individual cannot borrow to pay tax and claim the interest.
     
  2. Greyghost

    Greyghost Well-Known Member

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    Or do your taxes, pay your accountant (me), and instruct accountant to lodge by the actual losgemt due date (and make payment).
    Accounting will also be able to inform you of actual cgt liability in advance, you will then have time to prepare/put funds aside..
     
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  3. Scott No Mates

    Scott No Mates Well-Known Member

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  4. wylie

    wylie Moderator Staff Member

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    Or get your accountant to prepare your tax but not lodge until the latest you can. I'm doing this to put off payment of our tax until after June 2016. But once he has prepared my tax, my broker will use my 2014/15 figures to get me a better loan.
     
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  5. SOULFLY3

    SOULFLY3 Well-Known Member

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    Can one pay installments for owed CGT rather than a lump sum?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You can negotiate this with the ATO but generally they will add interest if the tax not paid when due.
     
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  7. Greyghost

    Greyghost Well-Known Member

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    As per my post said :)

    Also, you may struggle getting a loan with your 2014/15 tax return if if has not been lodged. Lenders sometimes ask for notice of assessment to verify the taxable income in the tax return stated is correct..

    I may stand corrected but you may find this strategy difficult..
     
  8. SOULFLY3

    SOULFLY3 Well-Known Member

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    Thanks Terry, yes expected interest
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It will depend on the circumstances. In many cases the NOA is not required.
     
  10. Andrew H

    Andrew H Well-Known Member

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    so what is the latestest you can submit your tax return then?
    i am in this boat right now - well when tax time comes. sold an IP this financial year
     
  11. MRO

    MRO Well-Known Member

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    If you lodge yourself the due date is 31 October. If you use a tax agent it can be as late as May the following year. The system is definately biased. I can understand the different lodgement dates to allow accountants to spread their workload but everyone should have the same payment date.
     
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  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    If you were already registered with the agent you may get up to mid May.! You cant choose to use an agent now and get the extended date. Some taxpayers have a earlier payment date. We can also lodged into June without clients getting penalised BUT they must pay when lodged and not wait for a notice.

    Several issues can affect this. A late lodger (ie 2014 wasnt done until after 1 July 2015) wont get any extension. Some categories of taxpayer have earlier dates and some are not entitled to lodge late. eg SMSF.

    Tax agents are the backbone of lodgement and compliance not etax. The ATO know this. Agents have lodgement quotas they must meet through the year not just on 16th May. We also do BAS, super, trust and other tax issues. Its not all just annual tax forms.

    The ATO also needs its workload spreadout. The Commonwealth budget is built around all of this.
     
  13. Marg4000

    Marg4000 Well-Known Member

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    We sold an IP on 3rd July, say 2010. Accountant lodged tax return for 2010/2011 in late May 2012. Paid CGT soon after, but had the money sitting in an offset account for nearly 2 years. At the time I figured it saved us about $4,500.
    Marg
     
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  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    That is a worthy saving! A months salary for most.
     
  15. wylie

    wylie Moderator Staff Member

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    Just saw this. Sorry greyghost I didn't realize your answered and I did too. My broker says I need figures from our accountant and I can apply to refinance without having submitted my tax. I'm hoping to do that in the next week or two. I'm paying 5.9% low doc style loan and want to get into a better loan ASAP.

    Waiting on my lender to refund over $5k I was wrongly charged as a risk fee. They are dragging this out. If they haven't refunded me by the time my accountant has my figures I'm off to the ombudsman.
     
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  16. MRO

    MRO Well-Known Member

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    Not disputing workload or the logical spreading of this throughout the year. I just dont think it is fair to give preferential payment terms to those who choose to use a tax agent. Why not allow extended lodgement dates but have the same single payment date for all taxpayers?
     
  17. wylie

    wylie Moderator Staff Member

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    Why is it preferential? It is not a big deal really and costs money to get the "preferential treatment". We are paying money to have someone do our tax. If you do your own, you save that money. Or you can choose to pay an accountant and get the benefit of delaying having to do your tax by 31 October yourself?
     
  18. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Lodgement is deferred for tax agents but payments are more complex. They aren't due in October. ATO describes this way....The payment due dates for a tax return are determined by client type, the lodgment due date and when the return is lodged.

    Sure the agent affects just one of those issues. In some cases. A 31 October lodger does not have to pay in October, Nov or even Dec in many cases. Often payment is due in March. BUT....It doesn't extend the imposition of higher PAYG Instalments.

    Matching slightly extended payment dates with extended agent lodgement assists to reduce the onus on a tax agent to self assess how much is due etc. It would complicate things.

    Same as agent clients get a extra month for a BAS for three of 4 quarters. Silly if payment was due ahead of lodgement. It would add complexity and cost.
     
  19. MRO

    MRO Well-Known Member

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    I am an accountant, i used to work in tax many years ago so have the benefit of not requiring an accountant to prepare my tax.

    If i have a $100k liability this year it will probably be due on the 21 of November. If you have the same liability it may be due as late as June, that can be over 6 months difference. The interest benefit to you would be around $2500. Obviously this number can get a lot bigger if the liability increases along with the added benefit of the delayed increase in PAYG instalments if applicable.

    I just cant accept that it is fair to give one taxpayer such a benefit over another based on how they lodge their tax return. I think the only fair system would be to set the payment date for all payers to June. The current lodgement date system could remain, only payment date would change. This will never happen in reality so probably not worth me arguing about it.
     
  20. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Tax is always unfair to someone. I reckon 50% of taxpayers want to pay it earlier to be done with the issue and 50% delay it. It might have saved $ to use the " I will use a tax agent strategy". Not to prepare it as such. You prep it. Just to review + lodge. As long as I'm satisfied its reliably prepared its no problem. You save $2,500 and fee reflects low input. Also it defers increased instalments sometimes.

    Just think of it this way - You will get your Joe Hockey letter that shows pretty lines of where the tax was wasted earlier. Apple and Google wont get that letter.