Talking Tax: Chris Lindsay, Lindsay Tax Solutions
New Capital Gains Tax? But we already have them!
Don’t fret over the possibility of a new capital gains tax, there are a myriad of them already in place! They are well and truly here and as you can see below they are far more extensive than most people realise. This article highlights some of the common, and not so common, capital gains taxes already applying.
Land and buildings: Property investors often fall into the tax net without realising it. This can happen through any of these gains:
- From actual or potential zoning changes
- From a profit-making undertaking
- Where land is bought with an intention or purpose of resale
- Where land is bought and sold within 10 years and the owner or related party is in the business of subdividing, developing or building on land
- Where land is bought and sold within 10 years and some subdivision or development work has occurred
- Where land has had significant money spent on it as part of a development or subdivision
Loans and debts: If a debt is forgiven, the borrower can have taxable income arise
- Amounts paid to induce someone into a lease of land or for a lease surrender are taxable
- A payment to compensate someone for capital outlay is taxable. For example, a landlord providing a fitout contribution to a tenant
- The gain on sale of a capital asset by a company to a related party is generally taxable when the gain is paid out
- Foreign Investment Funds (FIFs) (overseas shares): realised and unrealised gains can be taxed under the FIF rules
- Capital gains paid to non-resident shareholders can be taxed in certain situations
- Restraint of trade payments are generally taxable
Golden hellos: amounts paid to a person to induce them to enter into a new job or contract are generally taxable
Golden handcuffs: amounts paid for a person to remain in employment are taxable
Golden parachutes: amounts paid to a person to induce them to exit their current job or contract are generally taxable
Capital gains in companies can be taxed when paid out as dividends
If you are planning to sell an asset or undertake a transaction that you believe is non-taxable, don’t assume that the gain will be tax-free. As you can see, there are many traps for the unwary. Take professional advice early on as this will help identify any issues as well as possible solutions.
If you would like to discuss this issue, or any tax issue, please contact Chris Lindsay on firstname.lastname@example.org or 021829400 and I would be happy to discuss on a no obligation basis.