CGT Questions

CGT Question

I sold an investment property in August 2007 which I purchased in August 1998. Before doing this I asked my account to estimate the CGT which was reasonable.

While doing my Tax return for 2007-2008 the accountant now tells me that he forgot to add back the Depreciation that I have claimed over the years which means I am up for an additonal $8,000 in tax. He said there was a new ruling in 1997. Does any know if this is correct?

Thanks

Re: CGT Question

grand said:

I sold an investment property in August 2007 which I purchased in August 1998. Before doing this I asked my account to estimate the CGT which was reasonable.

While doing my Tax return for 2007-2008 the accountant now tells me that he forgot to add back the Depreciation that I have claimed over the years which means I am up for an additonal $8,000 in tax. He said there was a new ruling in 1997. Does any know if this is correct?

Thanks

Click to expand...

I'll talk to my boss about it on Tuesday
Never heard of anything like this before in my life

Please explain how you have "claimed" depreciation on your property?



Cheers
Brad

Re: CGT Question

Expenses that you have deducted to offset income in a given financial year cannot be included in the cost base of the asset.

Quick Question on CGT

Hi,
I'm about to do my tax and upon checking my broker statements, I realise the settlement date is in July 2010. If the trade was in FY09/10 and the settlement date is in FY10/11, which FY should I record the capital gain/loss?

Thanks.

Re: Quick Question on CGT

hardcoremike said:

Hi,
I'm about to do my tax and upon checking my broker statements, I realise the settlement date is in July 2010. If the trade was in FY09/10 and the settlement date is in FY10/11, which FY should I record the capital gain/loss?

Thanks.

Click to expand...

Hi Mike,

I use the trade date.

But that said check with your accountant at tax return time.

CGT Question

Hello

I am thinking about going as an investor, instead of a trader, so I can get the 50% off CGT after 1 year.

My issue is, let's say I am holding a particular stock since Jan 2011, I then buy more of that same stock in Feb 2011, then in March 2011, only sell the stock that I bought in Feb 2011.

Would that original stock purchased in Jan 2011 be good to go for the discount in Jan 2012?

I am using Bell Direct, and it adjusted my average price after I bought bought some extra shares and sold them.

Just would like some clarification on this from the veterans please

Re: CGT Question

We have been over this a few times...pretty much everything you can think of share and tax related has been discussed at length already.

https://www.aussiestockforums.com/forums/showthread.php?t=15463
https://www.aussiestockforums.com/forums/showthread.php?t=14225
https://www.aussiestockforums.com/forums/showthread.php?t=6115

Thanks for that. Looks like I can select which ones I sold:

"If you have the relevant records (for example, share certificates), you may be able to identify which particular shares or units you have disposed of. In other cases, the Commissioner will accept your selection of the identity of shares disposed of."

Excellent

I like this idea of yours Cynical.

"Buy 10000 XYZ @ 1.00 each = 10k
sell 8000 XYZ @ 1.12 each = 9K

Leaving 2000 XYZ @ 0.50 each ( 50 cents free carry approx) as a longer term hold, at
least that's the way ive been looking at it...and working fine so far."

How has it been working out for you?

donteatme said:

I like this idea of yours Cynical.

"Buy 10000 XYZ @ 1.00 each = 10k
sell 8000 XYZ @ 1.12 each = 9K

Leaving 2000 XYZ @ 0.50 each ( 50 cents free carry approx) as a longer term hold, at
least that's the way ive been looking at it...and working fine so far."

How has it been working out for you?

Click to expand...

Overall i reckon its a good long term strategy, it very much suits my mentality and risk comfort level...im low cost averaging and my strategy starts with the low cost (low share price) entry, though it would probably work just as well with trending stocks if you got the right one.

I can highly recommend having some sort of portfolio software (that allows parcel selling) as it is a big help in keeping track of what you paid for all your share parcels, it gets pretty complicated once you get to 23 stocks and maybe 50 parcels like im at now.

For CGT are there any detuctables one can charge against it?

E.g.
Buy Shares valued @ $10,000
24 months later sell all shares @ $20,000

$10,000 profit
Shares held for more than 1 year so 50% discount on CGT
so $5,000 added as income for the next tax year.

So far am I right?

So then what if there were expenses for acquiring this profit, such as brokerage fees, subscriptions to investors magazines, books, websites, interest from banks if capital came from a loan etc... Can these be off-set against the profit?

jank said:

For CGT are there any detuctables one can charge against it?

E.g.
Buy Shares valued @ $10,000
24 months later sell all shares @ $20,000

$10,000 profit
Shares held for more than 1 year so 50% discount on CGT
so $5,000 added as income for the next tax year.

So far am I right?

So then what if there were expenses for acquiring this profit, such as brokerage fees, subscriptions to investors magazines, books, websites, interest from banks if capital came from a loan etc... Can these be off-set against the profit?

Click to expand...

Brokerage fees are usually netted against the buying and selling prices. So if $10 to buy and $20 to sell, you would calculate your gain as $19,980 - $10,010 = $9,970. (you are correct in saying you only add 50% of the gain to your income if held for 1 year+)

If you borrowed to buy the shares, the interest paid will be deductible, but depends on the nature of the shares. If they are dividend paying shares and you bought them as an income producing asset, then you would write off the interest paid in each tax year for the duration you held the asset under "interest and dividend deductions". If they don't pay dividends, then you should add the total interest paid to your cost base when calculating the capital gain.

Note: anything added to your cost base for calculating CGT is done before you apply the 50% discount where applicable, so the 50% only applies to the "final" net gain.

The treatment of interest above is a bit of a generalisation and other factors may effect how it should be treated such as whether your are deemed to be a tax trader or not (there are whole threads on that discussion).

Some of the other expenses you listed may be tax deductible if you can show that they are needed to produce income. They would most likely be treated as income deductions in your tax return (for the year the expense was incurred) rather than added to the cost base for CGT calculations.

This is a complex area so you should get tax advice if you are unsure.

Just remember that capital losses must be applied to capital gains PRIOR to applying any 50% discount.

Calculate capital gains held less than 12mths, apply any current year(first then previous year) losses against this first.
Calculate capital gains held more than 12mths, apply any remaining losses against this BEFORE applying the 50% discount.

You can choose which gains to apply losses to first(CG held less than 12mths or CG held more than 12mths) but applying as described above results in the lowest tax liability.

This rule really sucks as I believe if we have held onto a stock for more than 12mths the discount should be locked in and losses should be applied after the 50% discount, after all we took the risk so we should have that discount guaranteed......damn ATO

Btw don't take my word, seek professional advice.

EDIT: just noticed Bellenuit noted this.

Cheers