Home – New Forums Money matters Capital gains tax and back yard office

  • This topic is empty.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • #991063
    Kate Toon
    Member
    • Total posts: 79
    Up
    0
    ::

    Hey

    I’m getting a backyard cabin built as a small office and want to claim the cost of the cabin, the build and the fit out on my tax.

    My accountant says it will be eligible for capital gains tax. But I wanted to get a second opinion – as from what I’ve read that only applies if it’s part of your house?

    Also if it is eligible what’s the big deal? It just means when we sell the house (20 years from now) I’ll have to pay back something?!?

    And yes, I should be asking my accountant, but though she’s great at her job I can never understand a word she says when it comes to tax matters!! I think I have a mental block.

    Thanks
    Kate

    #1179779
    PRO
    Member
    • Total posts: 450
    Up
    0
    ::

    Hi Kate

    General info below.

    Your principle place of residence (PPOR) consists of the land and the building attached to it.

    You get an exemption from Capital Gains Tax on your PPOR.

    BUT if you use a proportion of your PPOR for income producing purposes and claim deductions against your income for that then the PPOR exemption does not apply to the proportion of the property used for income.

    Under current legislation you would get 50% discount on the CGT of that proportion.

    To look at some very rough figures and there are a whole range of things that change the figures so need to have the figures run by your accountant.

    Say 20% of the property is subject to CGT

    Over 20 years the property increases in price by $500,000

    Then 20% of that is $100,000. You get a 50% CGT discount so that is $50,000 left that will be added on top of your income. If you own jointly with your partner then that is $25k added on top of each of your incomes.

    #1179780
    Kate Toon
    Member
    • Total posts: 79
    Up
    0
    ::

    Hi – THANK YOU THANK YOU

    Finally an explanation I can understand.
    I really appreciate you taking the time to tell me this.

    Best wishes,
    Kate

Viewing 3 posts - 1 through 3 (of 3 total)
  • You must be logged in to reply to this topic.