Retrospective Valuation for Capital Gains Tax
  • calendar Feb 21, 2024

Asia Valuation has been engaged to carry out a retrospective valuation for Capital Gains Tax purposes in Shanghai. With the advent of globalization, large-scale of Chinese had migrated to Australia for significant investment. In the early 2000s, waves of Chinese emigration had occurred historically. Many wealthy investors, in particular Shanghainese, had retained their local properties in Shanghai and moved to Australia accordingly. The migration trend had suggested that tax payers need to pay CGT according to Income Tax Assessment Act 1997.

After around two decades of living in Australia, the investors decided to sell their properties in Shanghai. That is the time when tax accountants need to assess the profit made by the investor in a financial year. Tax payers will need to account for income tax assessment. It is the ‘profit made’ for the properties incurred outside Australia in an income tax assessment. Any tax payer has had to pay capital gains tax or profits they made for any properties they held overseas.

How Income Tax Assessment plays a role in Capital Gains Tax?

Income Tax Assessment is glued with Capital Gains Tax. They are not separate tax in the eyes of Australian Tax Office (ATO). The ramification suggests that tax payer needs to pay capital gains tax as part of an income tax assessment. The payable amount in Capital Gains Tax is determined by various factors including:

  • The purchase price of the property
  • Duration of ownership for more or less than 12 months
  • Sold Price
  • Total Costs of Acquisition while owning and selling the property
  • Current Taxable income (Your tax rate)

Shanghai Housing Market

According to GAIN report of USDA Foreign Agricultural Service, Shanghai property prices rose to the peak during 2003. Many Shanghainese argued about the real estate bubble at that time. Media publication published that prices are soaring over the past two years, increasing at the rate between 23% to 30%. Increase cost of construction materials is a crucial factor, as the price of cement material had undoubtedly rose 20%, contributing to the rapid economic growth with inflation in China. The use of different materials in the construction market is also changing Shanghai’s housing markets. This had influenced the real estate markets. Especially with the introduction of both structural wood and interior wood products in areas well beyond Shanghai.

In Shanghai housing market, real estate prices can be varied considerably depending on the district. Statistic suggested there was a slowdown in residential real estate prices in the first 5 months of 2003, as the prices of office assets increased by less than 5%. During the first 5 months of 2004, prices in the downtown Puxi district soared by 5% compared to 1% for the Pudong district across the river. Officials have been quoted the standard building value rate for range of RMB 6,000-7,000 per square metres. In comparison, the average cost of housing in Shanghai was RMB 5,118/sqm at the end of 2003, while the national average for urban areas was RMB 2,212/sqm. In a document of ‘Living Cost in Shanghai‘, the latest news in China reported RMB 6,555/sqm in May 2004 in Shanghai.

Residential Construction Market in Shanghai

According to the economic statistic graph in National Bureau of Statistics from China, high-end apartment represented in red line as per the indicated graph demonstrated a soaring building value rate per sqm in term of renminbi (RMB) compared to other asset classes including retail, residential dwelling, offices, industrial and other categories. The standard building rate for apartment complex in Shanghai denoted an average rate of $6,108/sqm renminbi in year 2000. The apartment market in Shanghai witnessed a significant growth in 2005. Even more growth since 2010, demonstrating the peak in 2018. The second-best performing asset is office property indicating $9,223/sqm renminbi followed by residential dwelling, retail facilities, industrial-related premises and other categories.

MRICS and the Hong Kong Institute of Surveyors we appointed

Asia Valuation has appointed a team of foreign qualified property valuers or registered professional surveyor. They are accredited as MRICS and the Hong Kong Institute of Surveyors. They handled any valuation matters in Hong Kong and China. Our appointed surveyors possessed local knowledge in China, specialized skills and the sales database. They provide an accurate and detailed valuation report for income tax assessment. Any tax accountants who are interested in capital gains tax matters can contact us for more inquiry.

Asia Valuation is committed in demonstrating impeccable valuation SERVICES AND SOLUTIONS TO PROBLEMS for every client.
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