Time Your Capital Gains – Hold for 12 months & Sell in a low income year.
How does this strategy work?
You bought an investment.
A property for example.
Bought it for $200,000, sold it for $300,000.
You made $100,000 profit – wooohoo.
The tax man wants a piece of your pie – booo.
It’s called Capital Gains Tax.
So here’s 2 strategies around TIMING to minimise Tax on your Capital Gain.
Option 1 (Without Tax Planning): Pay Capital Gains Tax on $100,000 Profit.
47% x $100,000 = $47,000 tax.
Or only $53,000 profit left. 🙁
Option 2 (With Tax Planning): Hold off the sale of the Property until you’ve held it for 12 months.
You only get taxed on half the profits.
That’s 50% of $100,000 tax free (woohoo!) and
47% x $50,000 = $23,500 tax.
By timing the sale of your property you’d save $23,500 TAX and get $50,000 of profit TAX FREE, when compared to selling before 12 months is up.
Timing Your Capital Gains Part 2 –
So you’ve had a great year aka your income is high.
Any profits you make on the sale of an asset will go straight onto your (already high) taxable income.
So this TIMING strategy also relates to timing the sale with a year in which your income will be lower.
You know that round the world sailing trip you wanted to take the family on?
You know that crappy year where nothing really went well in business?
What do you need to implement this strategy?
- A Business.
- An asset that you’re going to sell at a profit.
- A chat with an Inspire Chartered Accountant – www.calendly.com/inspireca.
- To take action prior to 30 June.
FAQ’s: Timing Your Capital Gains.
Does the same strategy apply to selling shares in my business?
Yes, it certainly does.
What about when I sell shares in someone else’s business e.g. Telstra?
Yep – same treatment as well!
What if I hold the assets in a trust, can I avoid paying Capital Gains Tax?
Nice try – but no.
You cannot avoid capital gains tax.
If you hold assets in a trust, this strategy still applies.
Hold for over 12 months, and sell in a low income year!