6 Year Rule on PPR

N

neK

From the ATO site

http://www.ato.gov.au/corporate/content.asp?doc=/content/86191.htm

To qualify for a full CGT exemption, the property must have been your main residence from when you acquired it. If you move out of the property and rent it out, you can continue to claim an exemption from CGT for up to six years after you move out. If you do not rent it out, you can claim a CGT exemption for it for an indefinite period after you move out.
Click to expand...

My question is does anyone know how long you must actually live in there as a PPR from the date of acquisition?
 
What Terry says is correct - there is no real minimum time you must initially live in it before moving out, however if you just lived in it one day, it's hard to prove you really intended to live there (except in extenuating circumstances).

I like to use a rule of thumb that many accountants seem to use of 3 months. There is nothing that states that is the time period to use, but it's in line with Section 118-140 of the ITAA. What that states is that you can have 2 PPOR's for up to 6 months while you are selling your initial property (ie you have one PPOR, buy another before you sell your first one). For that rule to apply, you must have lived in the first residence for a continuous period of 3 months in the 12 month period before you sell it.

Link to legislation:
http://law.ato.gov.au/atolaw/view.htm?locid='PAC/19970038/118-140'#118-140

Although it doesn't directly apply to the "6 year rule", to me it has a close enough connection to deem it a reasonable argument if questioned by the ATO. If 3 months is in the legislation for the 2 PPOR rule, it's reasonable to assume 3 months would also apply to the 6 year rule.

Hope that helps :D
 
Learnt a BIG lesson recently that surfaced when we wanted to sell our PPR with the obvious CG exemption...but...forgot about the rental we knocked over to build it that we never lived in 1st...doh!! :mad:
We're looking @ now selling to our family trust (becomes IP) so we can release the $ to buy PPR here. That way we retain it. Am I on the right track?
Thanx
 
If you sell it into your family trust you will still have to pay the CGT. Any disposal or change in ownership is a trigger for CGT.
Marg
 
Thanx Marg.
We figure it's the cost of doin business to hold the property.
Now if I can only get St G to get jiggy with the procedure!
Any other comment welcome.
 
Hi Jinxy,

Selling a property to yourself sounds extreme.

You could you have a CGT liability you’ll get hit for stamp duty.

That’s a lot of equity flowing out the door. Have you looked at other ways to structure this deal?

Philip
 
Hi,

A further question with regards this rule:

In July we settled on our first home (unit) in Sydney. We are looking to move around Xmas i.e. after approx 6 months of living here and rent somewhere else in a nicer apartment.

If we do this, from what this thread indicates and as I understand, we can continue to be CGT exempt on this property for 6 years, as long as we don't buy another PPOR in that time.

Q1 - Can we also claim all the relevant deductions for the PPOR as though it is an investment property? i.e. can you negatively gear at the same time as receiving the 6 year CGT exemption, or do you have to choose one or the other. It just seems too good to be true as then you get the benefits of both PPOR and IP bundled into one.......but I'd be happy to hear if it was indeed allowed.

Q2 - If it is allowed, wouldn't this be a sensible strategy to employ for more FHB's in order to realise the negative gearing benefits and increase disposable income?

Q3 - Whilst we are currently on IO and placing additional disposable into an offset account, what is the best thing to do with these funds assuming the above strategy? Offset would be bad as you want to maximise the deductible debt, as I understand, increasing the interest paid and resulting tax deduction (I could be wrong here)? So is this best just going into a TD, managed fund etc, or are there better uses?

Q4 - the property is in joint names of my wife and I, can we claim the deductions against my income? I earn the large proportion of our household income and am in a higher tax bracket. I can clearly demonstrate it is my income currently paying all the interest/costs associated with the property.

Thanks alot for any help

SYDB
 
Last edited:
SYDB said:
Hi,



Q1 - Can we also claim all the relevant deductions for the PPOR as though it is an investment property? i.e. can you negatively gear at the same time as receiving the 6 year CGT exemption, or do you have to choose one or the other. It just seems too good to be true as then you get the benefits of both PPOR and IP bundled into one.......but I'd be happy to hear if it was indeed allowed.


Thanks alot for any help

SYDB
Click to expand...


Sorry just read the ATO link and you can still claim the deductions. That's great. Any help on the other matters appreciated!

Thanks

SYDB
 
SYDB said:
Hi,

A further question with regards this rule:

In July we settled on our first home (unit) in Sydney. We are looking to move around Xmas i.e. after approx 6 months of living here and rent somewhere else in a nicer apartment.

If we do this, from what this thread indicates and as I understand, we can continue to be CGT exempt on this property for 6 years, as long as we don't buy another PPOR in that time.

Q1 - Can we also claim all the relevant deductions for the PPOR as though it is an investment property? i.e. can you negatively gear at the same time as receiving the 6 year CGT exemption, or do you have to choose one or the other. It just seems too good to be true as then you get the benefits of both PPOR and IP bundled into one.......but I'd be happy to hear if it was indeed allowed.

Q2 - If it is allowed, wouldn't this be a sensible strategy to employ for more FHB's in order to realise the negative gearing benefits and increase disposable income?

Q3 - Whilst we are currently on IO and placing additional disposable into an offset account, what is the best thing to do with these funds assuming the above strategy? Offset would be bad as you want to maximise the deductible debt, as I understand, increasing the interest paid and resulting tax deduction (I could be wrong here)? So is this best just going into a TD, managed fund etc, or are there better uses?

Q4 - the property is in joint names of my wife and I, can we claim the deductions against my income? I earn the large proportion of our household income and am in a higher tax bracket. I can clearly demonstrate it is my income currently paying all the interest/costs associated with the property.

Thanks alot for any help

SYDB
Click to expand...

1. yes
2. yes
3. depends on the return you can get elsewhere. offset will still be saving you money
4. doesn't matter who pays, but who owns.
 
You must log in or register to reply here.

Similar threads

L
PPOR & Six year CGT exemption
Replies
1
Views
2K
Terry_w
Terry_w
L
Is repeatedly resetting the 6 yr rule tax evasion?
2
Replies
20
Views
4K
Ed Barton
E
M
Question about Capital Gain Tax (CGT) moving from old to new to old property....
Replies
3
Views
2K
Paul@PFI
Paul@PFI
albanga
CGT on PPOR Block after development.
Replies
3
Views
1K
albanga
albanga
M
CGT exemption 6-year rule and spouses
2
Replies
33
Views
6K
perthguy
P
Back
Top