Understanding CGT

Hi All,

I have a Property Capital Gains Tax question. The situation is as follows:

2000 - bought a unit with my parents.
Cost=$240,000
My Ownership = 67%
Parent 1 Ownership = 16.5%
Parent 2 Ownership = 16.5%

2005 - Parents bought me out and I paid CGT at the time.
Original Cost=$240,000
Sold Price=$360,000
New Ownership
Parent 1 Ownership = 50%
Parent 2 Ownership = 50%

2018 - Parents sold the unit
Original Cost=$240,000
Sold Price in 2005=$360,000
Sold Price in 2018=$675,000

Please note that I have not included all other costs that must be considered (i.e. legals, depreciation, improvements) for sake of clarity and to establish an understanding of the concept.

Questions is how is CGT calulated for my parents in the Final Disposal of the asset. I assume that it is

Capital Gain in 2005 was
Parent 1 Gain = 16.5% x ($360,000-$240,000) = $19,800
Parent 2 Gain = 16.5% x ($360,000-$240,000) = $19,800

Capital Gain in 2018 was
Parent 1 Gain = 50% x ($675,000-$360,000) = $157,500
Parent 2 Gain = 50% x ($675,000-$360,000) = $157,500

Total Capital Gain from asset
Parent 1 Gain = $19,800 + $157,500 = $177,300
Parent 2 Gain = $19,800 + $157,500 = $177,300

to which they can apply the 50% discount as they held the property for more than 1 year.

Is the basic understanding above correct or am I missing something?

Your answers will be greatly appreciated. Thank you

 

Your parents have two parts of the cost base. Each person owns the first part being a 16.5% interest and then a second part being a 33.5% interest.

So the calc should be for each part. The 16.5% interest was acquired with the 2005 transaction. Use the 240k number for that part not the 360k number.

 

Many issues could impact this. Ross is correct there are two CGT interests. The sale must be apportioned for each interest and two calcs occur. There may be a range of other issues that impact the CGT calcs incl improvements, transfer costs (eg Duty they paid on buying your %), additional legals and more. Things like costbase reductions for depreciation claims etc will all be issues

 

that is a rather unusual % of ownership to have in the beginning. Why did they each have 16.5% percent?

 

Terry - I see that specific % issues a bit where someone assists someone else in family to buy a property. It is unusual I will admit but can be common. Asian families tend not to do this and Son has two, Daughter has two, Mum has two etc....Some cultures see ownership as less personal than others that see it more as a family thing.

 

Half of one third

 

That explains it, partially at least, parents wanted to own a 1/3.
But why a 1/3?

 

Came down to what I could afford. Originally I could afford 2/3 and my parents bought the remainder 1/3 and split that part equally between them. The when they bought me out they owned 100% of the asset which again they split evenly between them.

So my high-level understanding of the situation appears to be correct? Thank you

 

Its a reason I often like issue of 12 shares when a company is formed. Its a number divisible by 1, 2, 3, 4 and 6 and caters well for 2, 3, 4 or 6 shareholders. Every case can be different.