Individual Tax

CGT is an important aspect of property transactions in Australia. Whether it be an investment property or primary residence, it is significant to understand CGT consequences. CGT is a tax levied on the profit from the sale of property. However, there are exemptions and concessions depending on the scenarios. Capital Gain= Capital Proceed-Cost Base Capital proceeds are what you receive, or are entitled to receive, from a capital gains taxevent, such as selling a property. In most cases your capital proceeds will be money.They can alsobe thevalue of any property you receive or are entitled to receive. The cost base of a capital gains tax (CGT)asset is generally what it cost you to buy it,plus other costs you incur to hold and dispose of it. The cost baseof an asset is additionof following five elements: Money paid or property given for the CGT asset. Incidental costs of acquiring the CGT asset or that relate to the CGT event. Costs of Owning the CGT asset. Capital costs to increase or preserve the value of asset or to install or move it. Capital costs of preserving or defending title or rights to CGT assets Generally, tax deductible costs are not included. There are exemptions and concessions in relation to CGT events.Some of them are Main Residence Exemption, 50% CGT discount if asset held longer than 12 months, small business concessions for qualifying businesses. If the asset was held for 12 months or more, CGT is reduced by 50% for resident individual. If you are a small business and if your company possessed an asset that was used to conduct your business, then you will only pay tax on 50% of the capital gain when you eventually sell this asset. Generally, main residence is exempt from CGT. A property can’t be treated as main residence if you stop living in it, except: For up to 6 years ifit’sused for income producing activity (the 6-year rule) Indefinitely, if it’s not used to produce income. Note: You are exempt from CGT if you brought property before 20 September 1985 as CGT came into effect from 20 September 1985. However, if there is a major capital improvement, it might be treated as a separate CGT asset.

With the increased pursuit of outstanding company debt by the ATO by using Director Penalty Notices to make Directors personally liable and creditors pursuing personal guarantees, many individuals without the means to satisfy such claims, are contemplating or being forced into bankruptcy. What is the actual consequences of bankruptcy on an individual and what are their obligations during the statutory period of three (3) years from the commencement of bankruptcy? An individual’s bankruptcy will be administered by a Registered Trustee or the Official Trustee (at least initially if a Registered Trustee has not been chosen). Ordinarily, a bankrupt will receive correspondence from the Trustee which will detail the rights and obligations of the bankrupt during the period of bankruptcy. A bankrupt’s first obligation will be to provide information to the Trustee regarding their finances (in particular, their income information). Information will also be provided by a Statement of Affairs which must be completed by the bankrupt and lodged within 14 days of notification of the bankruptcy. Assistance to complete the form may be sought from the appointed Trustee. The Trustee’s first step will ordinarily be to realise assets which are divisible amongst creditors. These assets will not include ordinary household goods, tools up to a set amount used to earn an income (currently $4,350) and a vehicle used as a primary means of transport up to a set amount (currently $9,400). Divisible assets will also include after acquired property such as houses, vehicles and winnings and extend to any inheritance for which the bankrupt is a beneficiary after the bankruptcy has commenced. In terms of relief, a bankrupt will no longer need to satisfy most of their debts, loans, gas and electricity bills etc. Some debts, however, will persist such as Child Support, Centrelink debts, toll fines etc. It would be prudent to review the debts a bankrupt is seeking to avoid prior to petitioning for their bankruptcy voluntarily. The primary restriction for a bankrupt is that they are unable to travel freely overseas. A bankrupt must request permission from their Trustee to travel overseas in writing and must receive permission in writing before doing so. A bankrupt must also reveal their bankruptcy before applying for credit over a set amount(currently $7,060). The bankruptcy must also be disclosed by a bankrupt if they are trading under a business name which does not include their name. The primary financial obligation of the bankrupt is the payment of contributions to theTrustee, which are calculated based on the bankrupt’s level of income and the number of their dependants as defined in the Bankruptcy Act. There is no limit of income that an individual may earn whilst bankrupt. However, once after tax income earned by the bankrupt exceeds a set amount (currently $72,117.30 if there are no dependants) half of any surplus above the threshold is payable to the bankrupt estate. A dependant is a person who resides with the bankrupt and depends on the bankrupt for economic support and currently earns no more than a total of $4,406.00 during an assessment period. A bankrupt with more than four (4) dependants may currently earn upto $98,079.80 after tax before being required to make contributions to their bankrupt estate. The final matter which individuals often overlook is that a person’s name will permanently appear on the National Personal Insolvency Index. This index is a searchable public register listing insolvency proceedings in Australia. This information sometimes also appears on private credit reference reports. This may affect the bankrupt’s ability to access finance in the future even after the bankrupt estate has been finalised and the bankrupt has been discharged from bankruptcy. Bankruptcy is a significant step and the consequences should be considered seriously before an individual applies for their personal bankruptcy voluntarily.