A relative of mine has a large piece of land for sale. There are 2 arrangements that he has been offered. A straightforward normal sale where he sells the land to the developer, or he exchanges the land for some houses from the developer. What would be the CGT implications of this arrangement? He has had the land for quite a while now. Any advice?
Help with Capital Gains Tax on Land Sale?
geek001 on 15/08/2016 - 15:44
Comments
This is incorrect advice. A financial advisor will not be able to offer specific advice on these scenarios, this is the job for an accountant.
I find it incredibly worrying that people have a reflex, "ask a financial advisor" response whenever a question involves more than a few thousand dollars.
Financial advisors have unfortunately had their reputations tarnished by the large number of scammers and other bad apples that have infested their ranks.
Sadly, because the way remuneration was structured historically, many of the larger orgs that should have a vested interest in cleaning up the industry have campaigned to keep the situation dangerous.
As a result, seeking the advice of a financial adviser can range from Ok all the way through to disastrous, and the risk increases for people who might have little knowledge of finances who take advice on a forum like this, rather than educating themselves more fully.If you are a person who is not confident of the answer to a question such as this, please don't post an incorrect answer. It is a bit like posting 'reinstall windows' as the answer to somebody saying they have network problems with their router. It is possible that is the right answer, but almost certainly it is unhelpful.
plus one. Despite being called financial planners, the vast majority are insurance salesmen.
your relative will be taxed 50% of the applicable rate if he has held the land for more than one year (which im
assuming he has).
for example: if he made a capital gain of 100k and hes on a 40% tax rate he will be taxed 20k.
might be a good idea to seek advice from his accountant if he is looking to reduce this, through reinvesting etc.Thanks for that. He is a retiree that has virtually no income other than super. I guess my question is around how the CGT assessment would be if he swapped them for some houses from the developer. Say he swapped them for 4 houses, would that trigger a CGT event if no money actually changed hands?
dont think there is such thing as legally "swapping" assets. it would create too many loopholes for people to evade tax. the closest thing would be "gifting" but in this scenario it is highly unlikely to happen.
tell your relo to take the $ and run while the market
is high and enjoy his retirement.
First step would be to find out when he originally purchased the land.
He is not exactly sure. It would be yonks ago, before I was born even. :)
If that's the case, it may be a pre-CGT asset (purchased before 20/9/1985). Pre-CGT asset = no CGT on disposal.
Oh cool. Thanks.
good one JetLi
… totally forgot about this one!
If the land was mine, and i was of pension age, I'd get the money up front, incase the developer goes bust and your left with a court case to try to recoup what's yours mid construction, which could drag on for years.
Good point. Thanks.
Geek, get them to seek advice from a professional. All sorts of factors come into play with some already mentioned above (i.e. pre CGT asset). If CGT is applicable then a good professional would factor in all aspects of your relatives personal situation to minimise the impact of the gain through good tax planning.
Yep, thanks for that. I just wanted to see if there are any obvious advantage to either, but looks like it may not even be a consideration since he bought the land eons ago.
Fair call.
As an accountant mate some things are easy to sort out through general information but this one has too many variables which could be major in terms of impact for your relative. Best of luck to you!
Ok, thanks for that. Quick question, the land is in Melbourne and my relative is now in Brisbane, do you think it is better that he gets an accountant in Brisbane or Melbourne? Are there different state laws governing this?
It shouldn't matter as the only state based factor would be stamp duty. Go wherever they will get good service!
Go see a financial advisor - they will have much better information and you will be able to give them more detailed information about your situation