A Capital gain or capital loss on a property is the difference between what the asset cost you (cost base) and what you received when you disposed of the property.
The cost base includes not only the purchase price of the property but also the associated fees such as stamp duty and legal costs.
A capital gain is the increase in an assets value over time. If you sell a property for a greater amount than the cost base then you will have made a capital gain.
On the other hand if the sale price is less than the original cost base then you have made a capital loss.
COST BASE – SALE PRICE / DISPOSABLE
Calculating Capital Gains Tax
To calculate Capital Gains Tax, the amount of capital gain is added to the amount of taxable income received from an investment property. This total amount of profit is then taxed at the marginal tax rate. However, if you have owned the property for longer than one year, only 50% of the capital gain will be added to your taxable income.
Not all property sales are subject to Capital Gains Tax. This tax doesn’t apply to the primary place of residence or family home. It’s also possible to rent out a primary place of residence for up to 6 years without paying Capital Gains Tax.
CAPITAL GAIN + TAXABLE INCOME RECEIVED FROM INVESTMENT PROPERTY TAXED AT MARGINAL TAX RATE
Top 3 tips to minimizing your capital gains tax payments owed
Although the Capital Gains Tax is fairly straightforward for property investors, there are a few ways to minimise payment owed;
1 – Maximise the original price/cost base of your property, be sure to include all legal fees stamp duty and any other incidental costs.
2 – Hold the property for 12 months and you’re automatically entitled to a 50% tax discount on any capital gain you make when selling the property.
3- Move in right away. As your primary place of residence is exempt from CGT moving in for the first 6 months you immediately qualify your property as our primary place of residence. However if you originally rented the property out then moved in at a later date you are still entitled to a partial exemption.
Chris buys a property and rents it out straight away.
2 years later he moves in and lives in the residence for 6 years before selling the property and makes a capital gain of $200,000.00.
Chris only has to pay a CGT on the one quarter of that amount. Which is the 2 years the property was rented, out of the total 8 years he held the property for.
Therefore his total taxable income amount is only $50,000.00. Even better because he has held the property for more than 12 months he is able to reduce this by 50% leaving him with a total taxable income of only $25,000.00.
If you would like to know more about capital gains tax give us a call on 02 49291122 or request an information package by emailing email@example.com
Ho Ho Ho, The Christmas party season is fast approaching, and you know what that means? Parties and lots of them!
So let’s make sure you’re not waking up to regrets over that festive fiesta.
Our Top tips to keep the tax man and your (tax) hangover at bay.
- Thinking of throwing your team function off site? Example – function centre, restaurant or a hotel, the cost of providing the party would normally be treated as a Fringe benefits tax (FBT) payable by the employer.
However! If the cost per team member is LESS THAN $300.00 AUD NO FBT will be payable. This is due to a little thing called minor benefits exemption. This exemption also applies if a partner or spouse comes to join in on the party fun.
- Speaking of minor benefits exemption, did you know it applies to each benefit provided?! That means if you’ve had a few too many rum balls and are feeling super generous and spend $290.00 AUD per person on the party AND THEN give a gift to each team member valued at a further $290.00 AUD, Both expenses are free of FBT!
- Hands off those Rum Balls! If you spend MORE THAN $300.00 AUD per person on the function, the whole lot will be subject to FBT, Not just the excess.
- Unfortunately the fat man in red won’t be giving free sleigh rides to and from the party’s festivities, so if your business plans to cover taxi fares they will count as part of the $300.00 AUD per person limit if the function is off-site. If the function is on your premises (see tip 5) fares will be exempt from FBT.
- If you plan on having your party on a working day on your business’s premises food and drink costs are exempt from FBT if consumed by current employed team members. If partners & spouses are joining in on the party there may be an FBT liability unless the cost is covered by the minor benefits exemption. (explained Above, but for more info see https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/FBT-exemptions-and-concessions/Minor-benefits-exemption/)
- Bah Humbug! If your Christmas shindig is exempt of FBT it is not tax deductible for income tax purposes. The business is also unable to claim goods and services tax credits for any of the costs incurred.
- Easy there Rudolph we forgot the clients! Holding a Christmas gathering for clients and contacts has its own set of rules – Luckily there are only two. Holding a bash for clients and contacts there is no FBT incurred but the costs are not income tax deductible.
- The rum balls have been forgotten and it’s on to the eggnog! Gift giving to clients and contacts is also FBT exempt and they generally ARE tax deductible and a GST credit can be claimed.
So there you have it! Your Christmas Party Planning survival guide! Save yourself the pre party headache and have a chat to your accountant to make sure you know where you stand tax wise before planning your party.
BAD Reviews GOOD for Business i hear you say?!
Yep. You heard it!
How can this
Before you get your knickers in a knot take a seat and keep reading...
Sure bad reviews can seem like a scary prospect but are they really?
How you respond publicly and handle these situations is what matters most!
Having a bad review isn’t necessarily a bad thing, although this can be unsettling for a business owner, it can provide valuable feedback that can actually give businesses an opportunity to improve.
Did you know that recent research into consumer behaviour shows that 9 in 10 consumers say they feel more positively about a business that has responded to a negative review in a positive way?
Well many reviews are community driven and this shows that reviews that occur organically are the ones consumers are more likely to trust. People generally know you can’t please 100 percent of consumers 100 percent of the time.
It is typical of business owners to focus on one bad review, but the truth is, potential consumers view the whole of a business’ reviews page which will usually include a decent ratio of positive and negative views and how the businesses have responded to those.
Take it from the ultra-smooth Barry White; They can’t get enough of your love babe...
Consumers love nothing more than feeling loved and cared about! That’s why it is so important to respond to all negative reviews promptly. Customers usually share feedback not to ‘name and shame’ but in the hope that it will help a business improve an offering, service or experience for future customers.
By replying to the review online and then communicating privately to help resolve a matter you have the opportunity to not only do business again with that customer but a lot of the times they will express their pleasure that they received a prompt response in relation to resolving an issue.
Good reviews – should you respond too?
YES YES YES!
Show people the love they have shown you. By taking the time to respond to a positive review it shows the reviewer that they are valued and appreciated by the business and also demonstrates to other viewers that the business takes customer service seriously.
See? Not so scary!
As of the 1st of July 2016 all business will need to change the way they make contributions to superfunds.