The end of financial year is a good time to think about your capital gains and losses for the year.

Timing and planning are everything when it comes to minimising your CGT bill and making the most out of your investment returns.

Capital gains tax (CGT) is incurred when a taxpayer disposes of an asset, for example, commercial and residential property, shares, units in unit trusts or collectables. If the asset sells for a price that is higher than the purchase price, the difference is considered to be a capital gain. Where an asset is sold at a loss (for a smaller amount than it was originally purchased), a capital loss is incurred. Capital losses can be used to offset capital gains in a financial year. It is also possible for taxpayers to carry capital losses forward to subsequent years if they do not have capital gains against which they can deduct them at the time.

Here are some strategies to reduce your CGT liability:

Dispose of poorly performing assets before the end of financial year

In years where you have incurred a significant capital gain, you may care to consider disposing of another asset that will yield a capital loss.

In the event that an underperforming asset will not have a positive turn around, disposing of it before the end of financial year will allow you to use the capital loss to offset your tax liability from any capital gains.

Defer disposal to a lower-income year

Instead of disposing of an asset that you expect to make a capital gain on this year, you may care to consider postponing the disposal if you expect to have a lower taxable income next year. For example, you may be planning to take some unpaid leave or have disposed of multiple assets in the current year.

Plan for CGT events in advance

If you are planning on making any new investments or disposing of assets, it always pays to plan your CGT strategy in advance. Careless timing can cost you a huge amount on your tax bill.

Carry forward your capital losses

You can carry forward capital losses from previous years to offset capital gains in the current year. The real offset value of capital losses diminishes, so if you have incurred a significant capital loss you may care to consider bringing forward the sale of an asset that you expect to make a capital gain on.

Our accountants are here and ready to help with any questions you may have regarding capital gains.

Call (02) 4926 2300 or email us.

If you would like to discuss capital gains at end of financial year please do not hesitate to give the team at Leenane Templeton a call.

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The ATO has indicated that it intends to undertake an extensive examination of share transactions – dating all the way back to 1985!

The objective of the data matching activity is to identify taxpayers with capital gains that have not been included in their taxable income. It is also likely that the investigation will reveal any inconsistencies in reporting of Employee Share Schemes (ESS).

In order to undertake this investigation, the ATO will be accessing the details of entities’ share records dating back over twenty years. It is estimated that in the process over 95 million records will be obtained, including the records of 1.2 million individual taxpayers.

By matching sale and purchase details, the tax office hopes to identify taxpayers that have failed to report capital gains made from share transactions.
Individual taxpayers who have failed to report a capital gain from shares (or disclose shares from an ESS) may care to contact the tax office to have the relevant tax return amended.

Our accountants are at hand to help you with any question you may have in relation to share transactions and the ATO.

Call (02) 4926 2300 or email us.

If the team at Leenane Templeton can help you with your share transactions or your tax in general, please do not hesitate to contact us.

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1. Personal Expenses
Be careful and ensure that any claims or interest on borrowing for investment are separated from interest on borrowing of a personal nature.

2. Substantiate Your Claim
Keep all receipts to prove any deductions and be able to show why the expense was incurred to derive assessable income.

3. SMSFs And Property
Consider moving Business Real Property into a SMSF. This is a good way to free up some cash coming into tax time.

4. Renovations By Previous Property Owner
If the renovations are identifiable and itemized in a depreciation schedule, then it is possible to be eligible for a deduction for depreciation on the cost of improvements by a previous property owner.

5. Capital Gains Tax
Ensure any capital gains on the sale of property are properly recorded. The ATO are keeping an eye out for any undisclosed capital gains from disposing of assets to invest in superannuation.

6. Fixtures And Fittings
If fixtures and fitting cost less than $300, it may be possible to claim a tax deduction.

7. Self-Education Expenses
Keep all receipts and documentation relating to self-education, such as seminars and investment related books and magazines, in order to qualify for tax deduction.

8. Use A Quantity Surveyor
There are benefits to having a depreciation schedule prepared by a qualified quantity surveyor. They could help gain a significant tax deduction for depreciation. The cost of employing such a surveyor is tax deductible and will help back up a capital allowance claim.

9. Pre-Pay Interest
Depending on the lender, it is possible to pre-pay interest to defer the payment of tax. This is dependant on possible future income, interest rates and cash flow impact.

10. Repairs To Property
Be aware that although the cost of initial repairs at the time of purchase is not deductible, expenses for repairs further down the track are. They must relate, however, to wear and tear or other damage incurred as a result of earning rental income.

11. Short Term Holdings
If a property has been renovated with the aim of selling it at a profit in the short term, the ATO may tax it as if it were a ‘profit making scheme’. If this occurs, it is not possible to take advantage of CGT concessions.

For more information about year end strategies please contact our Newcastle Financial Advisors on 02 4926 2300

This information is of a general nature only. It is not intended as personal advice or as investment recommendation, and does not take into account the particular investment objectives, financial situation and needs of a particular investor. Before making an investment decision you should read the product disclosure statement of any financial product referred to in this newsletter and speak with your financial planner to assess whether the advice is appropriate to your particular investment objectives. financial situation and needs. See our disclaimer for full details.

For other resources visit:

Newcastle Accountants Leenane Templeton

Self Managed Super Fund Advisors

Newcastle Accountants

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