Reduce Capital Gains Tax through Strategic Planning
The NSW Covid-19 Delta variant has once again made its impact felt over the past week, resulting in 22 new cases today. In response, the NSW government has initiated a lockdown in four Local Government Areas: City of Sydney, Waverley, Woollahra, and Randwick. To those residing or working in these areas, we extend our best wishes and encourage you to stay resilient.
Understanding Capital Gains Tax (CGT) Rules
A common query that often arises pertains to the potential capital gains tax liability when selling a house that was once a primary residence. The Australian Taxation System entails rules for Capital Gains Tax (CGT) application. Essentially, any profit realized from the sale of a capital asset is subject to tax. Conversely, a loss can be advantageous as it can offset future capital gains.
Overlooked Aspect: Off-the-Plan Property Deposits
Amidst these considerations, a crucial aspect is often overlooked—cases where individuals pay deposits for off-the-plan properties but circumstances prevent property settlement, leading to deposit forfeiture. In such scenarios, seeking professional taxation advice is vital. As the foremost CPA accountant in Ashfield Inner West Sydney and Adelaide, we have assisted numerous clients in restructuring tax returns to claim these expenses as capital losses, thereby effectively reduce capital gains tax.
Strategic Reporting for Long-Term Benefits
The query may arise—why report these losses ahead of time? Why not wait until a capital gain occurs? The answer lies in strategic foresight. Reporting losses when they transpire allows for better management. Conversely, reporting a significant loss suddenly in a single year, carried over from prior years, can raise red flags with the Australian Taxation Office, increasing the likelihood of an audit. At our firm, we believe in proactive measures to reduce capital gains tax through informed and prudent strategies.
Empowering Through Knowledge: ATO’s Audit Powers
Also, it is essential to point out that the Australian Taxation Office has many powers during the audit time. For example, they can allege you had made a mistake in the tax return; however, they do not need to prove it. The onus to confirm it is on you, and if they don’t accept your explanation, they will penalize you with the shortfall and the shortfall tax penalty.
Seek Expert Assistance
Hence if you are thinking to sell a house or a property, please come and talk to us; as one of the leading CPA accounting firms in Inner West Sydney and Adelaide, we would be in a position to assist you with the issue.