RS> In that case the CGT didnt even apply coz there was no CGT on the
RS> investment, what could have been used as a deposit.

BG> Understood.  Are there currently any loopholes in the CGT legislation,
BG> or have all classes of investment (or even unintentional capital gains)
BG> been considered now (including even profits on motor cars, as dad found
BG> to his dismay).

There are a few, mainly involving slipping what are actually investments,
into CGT exempt areas. For example some people actually deliberately make
money on collectibles and in some circumstances those can be made to appear
to just be normal possessions which were owned to be used, not be an
investment. Antique furniture is a classic example of that.

One of the classic loopholes on property is still available. Buy a rundown
dump, improve it very substantially, flog it. You have to be careful to
actually live in it while doing that, but its not hard to keep it CGT exempt
even today. In fact in some ways one problem with the CGT law is that it
actively encourages people to enhance their principle place of residence.

Corse you need some care too, its not hard to spend more on enhancement
of a property than you will see in an increase in its market value. Thats
pretty easy to avoid in some areas tho. Buying a decrepit property in what
is becoming a fashionable area to live, and you have to really stuff things
up big time to not come out ahead financially. Not bad work in many ways
either, quite attractive as an alternative to a second job fully taxed and
having to find the work too. You get to work at whatever rate you choose,
at your own convenience. And the profit is all tax free.

Same applys to building houses for that matter. If you buy the land, build
the house and live in it for a short while, the whole of the capital gain
is exempt, in effect its close to being a way of working and not paying
income tax either. Living in the house for a while fits in pretty well with
the next house going thru its early stages when its not yet livable in too.
There are specific provisions in the CGT exemptions on the principle
residence for that progression.

BG> Yeah, it's the tax-free investments which reap the major benefits,
BG> but the more correct term for this stuff is actually "tax-paid",
BG> in which case it's the net return which is important.

RS> Nope, you are confusing different things there. If your wife doesnt
RS> work, she can receive the interest on those bonds and as long as the
RS> total income is below the tax free threshold, it really is tax free.
RS> Thats currently $5400, which at 10% is $54K. Its a bit more
RS> complicated than that with dependant spouse rebates and stuff but
RS> thats the general idea.

BG> As I'm not officially married any more, I naturally approach things
BG> like this from the POV of a single person, so any interest paid
BG> would, in my case, be taxed at my highest marginal rate.

Sure, that particular approach does depend on having someone else able
to appear to be receiving the income who has a zero or very low marginal
tax rate. There are also possibilitys with children too, but also other
tax considerations like specific taxation of 'unearnt income' by children.

BG> And then CGT is payable when the investment is realised.  Is there
BG> any point in saving these days?

Yes, there can well be. Part of the trick today is to do it in tax
favourable areas. Particularly the main tax exempt area, the principle
residence. There are also some powerful tax advantages in super type
investments too. Its not too hard to make some investments qualify as
super today.

--- PQWK202