Another CGT question

[NOI53Y]

Hey all,

So i've done a search but can't find exactly what i'm after.

My wife and I own an IP and it is about to get listed on the market.

We bought it back in 2006 for 230k and lived in it straight away until 2010 and then it became the IP. At that point it was valued at 330k.

Due to the market we are only looking at getting 330-340k for it which is ok. These things happen.

I'm a little confused as to how much CGT i'll be up for. Is it on the whole 100K (if we sold for 330k) or because we are seeling for what it was valued at when it became an IP do we pay nothing.

Any advice would be great folks.

 

[NOI53Y]

Never mind. I rang the ATO today and they gave me all the info I was after. Pretty helpful actually.

 

[Jamie M]

Hi Noisy

What was the ATO's advice?

Cheers

Jamie

 

[Terry_w]

Possibly not CGT at all if you are not counting another main residence exemption.

 

[NOI53Y]

Ok so this is how it was explained to me.

Work out how many days we owned the property.
Work out how many days it was a rental for and work out the percentage of time it was a rental.

So in my case approx around 33% (depending on when it sells)

Work out the cost base (which for my circumstance is calculated from the date it became a rental)

See how much it sells for and if there is a gain over the cost base then that's what the CGT would be based on but only 33% of it as per the calculation above.

That figure is then halved because we have owned it for more than 12 months.

So a rough calculation may be something like this (easy maths are used here)

Original value at purchase (not really needed) - $200000

Value at time of rental - $300000
plus costs e.g. 15k

Cost Base = $315000

Sale price - $350000

Gain = $35000

CGT at 33% = $11550

Total payable CGT at 50% = $5775

So hopefully the info I was given is right and my above calculations make sense. If not can someone please ellaborate.

 

[Terry_w]

I don't think that is correct because you lived in the property first.

You may be able to work out CGT based on the market value as of the time it first was used to produce income.

So if the value was $300,000 and the sale price was $350,00 then the gain is $50k less buying/selling costs and then the 50% discount is applied.

There would be no % apportionment applying unless you had rented it out first.

Also, since you did live in it first you could possibly apply the main residence exemption and pay no tax.

I am not an accountant so seek your own tax advice.

 

[dan c]

So hopefully the info I was given is right and my above calculations make sense. If not can someone please ellaborate.

No, the advice given to you is wrong. What you have written seems to take parts of BOTH methods of calculating CGT.

As you lived in the property straight after settlement, you need to get a valuation from the time the property became income producing. You don't need to worry about percentages.

Your capital gain calculation is simply sales price (less fees etc) less valuation.

 

[Rob G.]

Did you occupy it again after it became an IP ?

Were you claiming another residence as your PPOR when you initially occupied ?

Cheers,

Rob

 

[coastymike]

ATO helpline giving incorrect advice ? NEVER !!! And yes i am being highly sarcastic.

 

[Aaron_C]

If the ATO helpline was actually the same division as their prosecution area, we would have far less cases in the AAT.

 

[coastymike]

hahha classic. i love that Aaron.

 

[Jeith]

I agree with Terryw's calculation. The ATO helpline is the last place I'd go for tax advice!