Query: I signed a contract in July 2015 to purchase an condominium off the plan at Wollongong, NSW.
At the moment I owned one other condominium that I used to be dwelling in, however offered it with the intention to pay for the brand new condominium, which was settled on August 21, 2017. That is the one property that I personal.
Throughout all of that point, my intention was for me to dwell on this new condominium. Nonetheless, my private circumstances modified and I ended up dwelling in Sydney in a rented condominium and renting the Wollongong condominium which I’ve by no means lived in.
If I used to be to promote my condominium, am I nonetheless liable to pay Capital Positive aspects Tax though it’s my solely property?
I wish to know if I should pay CGT, ought to I promote my condominium, and if there are methods I can keep away from that.
Reply: A ‘principal residence’ is exempt from Capital Positive aspects Tax (CGT).
To be thought of a principal residence the ATO website states: “Your ‘principal residence’ (your own home) is usually exempt from capital positive factors tax (CGT). To get the exemption, the property will need to have a dwelling on it and it’s essential to have lived in it.”
The mere intention to dwell within the property, however then not doing so, will typically not exempt you from capital positive factors tax. Meaning you’ll pay tax on the revenue (capital acquire) you make if you promote your Wollongong property.
The capital acquire is the distinction between what it price you to accumulate (and preserve) the property and the quantity you promote it for.
If you happen to did transfer into this property, chances are you’ll be entitled to some capital positive factors tax exemptions for the interval – or proportion of interval – that you simply lived in that property as your own home.
Nonetheless, if this did turn out to be your principal residence, then you may now not declare tax deductions comparable to depreciation and curiosity prices.
I might recommend talking to an accountant or your most well-liked tax adviser to obtain particular tax recommendation.
Query: I’m a 30-year-old incomes $80,000 a 12 months and saving $1000 a fortnight in the meanwhile. I put $800 a fortnight right into a high-interest financial savings account (1.65% p.a.) and $100 every week into the Vanguard LifeStrategy Balanced Fund.
I opened the Vanguard account in January with a $5000 deposit. I’ve $40,000 within the financial savings account, and $9000 within the Vanguard fund, however solely $8000 in tremendous, as I used to be born abroad and have solely been working in Australia for 3 years.
Might I put the $1000 in fortnightly financial savings to higher use? Ought to I think about investing it in numerous belongings? In that case, which of them? Or ought to I make investments a few of it in tremendous, by way of pre-tax contributions?
In the meanwhile, I want investing in Vanguard over tremendous, as I don’t know what my future holds and like retaining entry to the cash. And what makes issues complicated is that I’ve no particular targets in the meanwhile, which is the place most monetary recommendation articles start.
I need to maximise my long-term wealth however haven’t any plans.
Reply: Firstly, you’re appropriate in that almost all monetary recommendation articles begin by asking the reader to find out and prioritise their targets, as this performs a big half in figuring out what methods and investments are acceptable.
For instance, in case you have short-term targets then saving into the high-interest financial savings account needs to be prioritised.
When you have a medium-to-long-term aim, then the Vanguard Balanced Fund would be the strategy to go, or if constructing funds for retirement, then investing by way of tremendous would make sense.
Secondly, and on a really optimistic notice, congratulations in your disciplined financial savings technique. Despite the fact that chances are you’ll not have definitive targets at present, by allocating funds throughout completely different accounts with completely different funding targets and timeframes, you’re not less than hedging your bets.
Your present technique will imply that you’ve extra monetary choices and freedom when you do set some targets.
In relation to your present investments and technique, some common feedback:
- As your monetary targets are at present not set, allocating the vast majority of your funds to a high-yield financial savings account, which has easy accessibility and gained’t undergo a loss, is a prudent technique that may be maintained till you have got agency plans for the funds
- Vanguard is a big, well-rated and low-cost fund supervisor. The Balanced fund, because the identify suggests, offers a great degree of diversification throughout all the foremost asset courses. As long as you are ready to just accept some capital volatility and have an funding time-frame of three to 5 years, then you may proceed allocating a small quantity to this fund every fortnight. I notice that Vanguard has just lately launched their ‘Personal Investor’ platform, via which you could possibly entry the wholesale model of the identical fund however at a decrease price
- Wage sacrificing into superannuation would offer you some tax financial savings, and the funds would then even be invested in a low-tax surroundings. Nonetheless, as you wouldn’t have the ability to entry the funds for at least 30 years, chances are you’ll not need to make investments further funds into tremendous till you’re clear in your long run monetary targets.
I recommend talking with a monetary planner or monetary coach who can sit down and enable you work out and prioritise your long-term targets.