Wendy’s done well from selling a house in Brisbane and wants to share the love with some tax-deductible donations to charity. Chartered accountant GAIL FREEMAN gets her on the right track.

Wendy has just sold her Brisbane house for $1.8 million and is worried about how much capital gains tax she’s up for.

She came to see me about it and I told her I needed information such as how much the property cost, when it was bought, were there renovations and whether Wendy had lived there.

Wendy said she bought the house in 1997 for $220,000.

“It was new, although I put in carpets, a stove and a dishwasher,” Wendy said. “Nothing was spent on renovations and I lived there for four years before coming to Canberra.

“It looks to me as if this gain is substantial and I remember you mentioning that if I made a large donation. It could reduce my tax considerably.”

I told Wendy we’d look at the capital gains tax issues first, then the donation situation.

“At first glance you appear to have made a capital gain of about $1,580,000,” I said.

“This gain is reduced by such things as stamp duty, legal fees, both on purchase and sale and all your costs of selling. It is increased by the building depreciation you have claimed.

For ease of arithmetic, I will assume that the taxable capital gain is $1.5 million. The tax on this would be about $350,000.”

Wendy said that was a lot less than she had expected. However, she still wanted to support some local charities with some of this “windfall gain”.

“I know in the current economy, there are a lot of people in need of assistance and would like to choose a charity or charities where I know the money is spent locally in Canberra and I know that it will go directly to the people who need it without being swallowed up in big administration costs,” she said.

I told Wendy that to ensure a tax deduction, the charity she selected must be a deductible gift recipient (DGR). To double check whether a chosen charity is a deductible gift recipient, you can search ABN Lookup.

“I must add that it is very generous and I’m sure the donation will be welcomed by the charity of your choice,” I said.

“It is the perfect time of year to donate as we are coming into winter and I understand that there is more call on charities currently. The end of the financial year is always a good time to take stock of your financial position and look at making those last-minute donations.”

Wendy said: “Thank you, Gail. I’m excited to see how I can help our local community.”

If you need advice on capital gains tax, making donations or any other tax related matter contact the experts at Gail Freeman & Co Pty Ltd on 02 6295 2844, email [email protected] or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.

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