Do not mess up with capital gains calculations this year, warns accountant

The ATO’s increased IT capabilities has one accountant warning investors that capital gains tax is one area you do not want to be messing up.

The ATO is able, under legislation, to access data that others cannot reach due to privacy legislation. This is then matched against your information and claims made on your tax returns.

Capital gains tax is particularly on the radar, warned Property Tax Specialists’ Shukri Barbara.

His tax tip is to ensure that you declare all transactions.

“Diffculties tend to arise in distinguishing when a sol property was exempt due to it being a Main Residence and protected under thesix year rule if it was subsequently rented. They are not to be messed with in 2014/15,” Barbara noted.

Timing your capital gains and losses on investment properties is also crucial.

He urges investors to remember that the important date is the contract date, and not the settlement date. If you’re carrying capital losses, then note the date against any capital gain you may also be realising.

His tip is that if you’re singing the contract before June 30, then any gains can be offset against tax incurred over the year or carried forward from a previous year “before the balance can be assessed as taxable.”

“If there is an excess of taxable amount – 50% discount may be applicable if the property was held for longer than 12 months,” he explains.

If you sign a day later, on or after July 1, then the tax is reported in the 2014 tax return.

“What you do not want to do is generate a CG this year, pay tax and then sell a loss property next year when there are no CG to offset against,” says Barbara.

“Capital losses incurred in any year are available to be carried forward to future years if there are insufficient gains to absorb it in the same year. It can be carried forward for an indefinite period.”