When a property first becomes income producing the cost base is reset to the value at the date it becomes income producing.
Many people want to save a few hundred dollars by not ordering a valuation, but rather rely on a bank’s valuation. This could be potentially costing them thousands of dollars.
Ned moves out of his property and gets his broker to order a bank valuation which comes in at $475,000. Ned thinks this is a bit low and asks for another valuation, but the bank refuses and so he doesn’t really think about it any further.
Maude, Ned’s wife, orders a private valuation for tax purposes which comes in at $500,000. When the property is later sold for $600,000 there will be a difference in the cost base:
Not bad tax saving when the advice only cost $660!
This article was written by Terryw from: