Do I have to pay Capital Gains Tax?

Q. Our son has just purchased a unit as owner/occupier but cannot move in until current lease period has expired, which is 14/01/09.   Does this preclude him from the capital gains exemption as an owner when he does finally sell, after one year of ownership of course.

Josie’s answer: Capital Gains Tax is a confusing area of tax law and it is really a question that needs to be directed to an accountant.   Anyway, I will give you my understanding of the way it may apply to your son’s situation.   He may be subject to some capital gains tax, however it will be pro-rated when he sells.  For example, if he Read more

Do I get a refund of tax when my super is negative?

Q. Investment earnings in superannuation are taxed at 15%. What happens when your super fund makes a loss? (as may well be for me again this year). Is there no tax? Is there a credit (I wish) or is the loss offset in future years within the fund?

Josie’s answer: This is a really good question and one I am sure lots of visitors to www.askjosiekay.com and listeners of Money Matters will have similar thoughts.

I am also assuming that your superannuation contributions are invested in an industry or retail superannuation fund (in other words, they are managed funds). You are right in stating that investment earnings in superannuation funds are taxed at 15%, however, this the maximum they pay.

In reality, they are probably paying a lot less, particularly if they are invested in shares as they can offset imputation credits attached to shares (in simple terms, they get a refund of any company tax, up to 30%, that may have been paid on the dividend when it is passed on to superannuation fund).

Therefore, you are probably paying a lot less than 15% and may even get a rebate of excess franking credits. I know a bit technical, but this is a good thing. Read more

How Do I Minimise Capital Gains Tax?

Q. In August 2004 I bought an investment house with the plan to live in it when I retire. (I’m 55 yrs old in August 2008).

I own my existing home and the investment house has been rented since the day I bought it. My plans have since changed and I wish to sell the investment house to fund other activities in my retirement.

I was planning to sell my present home around Christmas 2008, then live in the investment house until I sell it around July/August 2009.

Is there some strategy I could put in place to minimise Capital Gains Tax when I sell the investment house?

Josie’s answer: As you would be aware, your family home which is called your main residence in the ATO’s Capital Gains Tax Guide, is exempt from capital gains tax (CGT)

However, it is only possible to nominate one dwelling as your main residence. In your case, the dwelling that you describe as ‘your present home’ will be exempt from CGT when you sell. Unfortunately, a portion of your investment property will be subject to CGT. Read more

How much Capital Gains Tax do I have to pay?

Q. Hi Josie just a quick question. In 2001 my wife and i purchased our home and 50 acres for $198000.We have just sold half the land alone for $218,000 leaving us the house and 25 acres. We own the place outright and want to know what capital gains we would have to pay and how we can reduce this if we can. I am employed and make around $52000 and my wife works part time earning around $10000 and we have 2 children aged 13 and 10.Thank you for your time Tim

Josie’s answer: Hi Tim. Capital Gains Tax (CGT) is a very complex area of taxation. Basically, the family home is tax free, but only if the land area is less than 2 hectares.

Consequently, the half that you sold will be subject to capital gains tax. Determining how much is very tricky as difficulties arise in determining the value of the land in excess of the 2 hectares which is exempt.

For example, a qualified valuer may value the land that your family home is sitting on to be worth significantly more than the balance (some of it could be swamp land). Therefore, I am not really in a position to estimate your potential tax liability. For your info, I have included a link to the ATO website which covers this matter Guide to capital gains tax 2005-06. Read more