a question on CGT

kingy

kingy

hi guys...

currently in a dilemma... i just purchased a property and would like to avoid paying CGT... but im looking to keep the place for at least 10-15years before selling it...

my initial plan was moving in for the first 6months and then renting it out for the next 5years then moving in again for 6 months and renting out for 5years... will i be exempted from CGT?

according to the below site it seems like CGT will be exempted... but i thought ill get some feedback before taking any actions...
http://www.ato.gov.au/corporate/content.aspx?doc=/content/86191.htm
 
You only can have one main residence at a time, so as long as you don't own another PPOR, this strategy would work.

The six year 'clock' on absences from your PPOR resets when you move back in.
 
kingy said:
hi guys...

currently in a dilemma... i just purchased a property and would like to avoid paying CGT... but im looking to keep the place for at least 10-15years before selling it...

my initial plan was moving in for the first 6months and then renting it out for the next 5years then moving in again for 6 months and renting out for 5years... will i be exempted from CGT?

according to the below site it seems like CGT will be exempted... but i thought ill get some feedback before taking any actions...
http://www.ato.gov.au/corporate/content.aspx?doc=/content/86191.htm
Click to expand...

Many people would like to avoid paying CGT too.

If you have no other property then it may be possible to do what you are proposing.
 
Your proposal is correct and would allow you to avoid CGT.

You are only allowed to have 1 PPOR at any one time but you can own and live in another property but you cannot claim this as your PPOR.

You only have to decide which property you own is your PPOR when you sell one of them and you can make this decision based on the most advantageous outcome tax wise.
 
What if, during the time that you weren't living in the PPOR, you rented it and claimed tax deductions? Surely then, you couldn't claim PPOR CGT exemption when you sold?

E.g., If I have an IP than I lived in briefly, 4 years ago and I also have another property that I've been living in for the past 4 years. I am selling both. Can I claim the IP as my PPOR even though it's been rented for years and I've clearly been living in the other property as a PPOR?
 
luce.rocks said:
What if, during the time that you weren't living in the PPOR, you rented it and claimed tax deductions? Surely then, you couldn't claim PPOR CGT exemption when you sold?

E.g., If I have an IP than I lived in briefly, 4 years ago and I also have another property that I've been living in for the past 4 years. I am selling both. Can I claim the IP as my PPOR even though it's been rented for years and I've clearly been living in the other property as a PPOR?
Click to expand...

yes, but then the place you've been living at for the last 4 years will be subject to CGT
 
There could be an advantage in doing this as you can increase your cost base on the place you are living in by such things as interest, rates, insurance etc which might well make that property effectively CGT free or certainly enough to make covering the other property with your PPOR exemption worthwhile. This is a complex area - get professional advice before you do anything. Make sure you are giving your adviser all the information as the advice could be impacted on by various things eg I signed a contract on 31 Jan 2005 settled on 31 Mar 2005 moved in on 1st April 2006 will be different from I signed a contract on 31 Jan 2005 settled on 31 Mar 2005 moved in on 1 September 2005.
 
just putting up another scenario guys...

lets say i have owned my PPOR for more than 10yrs with the cycle of living in it for 6months and renting out for 5yrs...

then i decide to buy another IP... which means i have 1 PPOR and 1 IP... and im renting elsewhere to stay...

if i plan to sell my PPOR 2yrs after getting an IP... will it be exempted from CGT?
 
kingy said:
just putting up another scenario guys...

lets say i have owned my PPOR for more than 10yrs with the cycle of living in it for 6months and renting out for 5yrs...

then i decide to buy another IP... which means i have 1 PPOR and 1 IP... and im renting elsewhere to stay...

if i plan to sell my PPOR 2yrs after getting an IP... will it be exempted from CGT?
Click to expand...

It could be CGT depending on a lot of factors.
 
thanks for the info guys...

so paul... if lets say i own 1 PPOR and 1 IP... then after selling the PPOR... im assuming i wont be able to make my IP to a PPOR without paying any CGT and will have to pay a portion of it yes?

so what happens if after selling my PPOR which leaves me 1 IP... then i buy another property and do the same thing again as i did on the first PPOR which is staying for 6 months and renting out 5yrs and cycle goes on... my 2nd PPOR should be exempted from CGT is that right?
 
Kingy,

Basically you can nominate one place as your PPOR at any one time.

Each time you move into your own place and claim that as your PPOR it then changes CGT to a percentage of the holding time vs capital gain. If a place has been your PPOR for 5 years and you owned it for 10 years but claimed elsewhere as PPOR then you will only pay CGT on half of your CG (5 years)

If you do not claim anywhere else as a PPOR then you are OK for CGT.

Remember that CGT PPOR needs to be the same as land tax PPOR or one of them will get you:(
 
Macca said:
Remember that CGT PPOR needs to be the same as land tax PPOR or one of them will get you:(
Click to expand...

Not necessarily. For instance in NSW a place could qualify as your main residence for CGT purposes but not for land tax purposes. Different rules as one is state and one is commonwealth
 
kingy said:
thanks for the info guys...

so paul... if lets say i own 1 PPOR and 1 IP... then after selling the PPOR... im assuming i wont be able to make my IP to a PPOR without paying any CGT and will have to pay a portion of it yes?
Click to expand...

Once you sell your PPOR you can then move into your IP without paying CGT.
BUT you will be hit with CGT once you sell it depending on the proportion of the time it was PPOR or IP.
 
Terry_w said:
Not necessarily. For instance in NSW a place could qualify as your main residence for CGT purposes but not for land tax purposes. Different rules as one is state and one is commonwealth
Click to expand...

Technically you are probably right Terry but I would not want to be arguing with the tax man when I had declared something different to the OSR :confused:
 
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