another CGT question

[cadence]

Hi everyone

Tried to search CGT on IP converted to PPOR in title, there was only one result which applied to the opposite situation. Tried to search the terms in contents and lots of posts were brought up but all those situations sounded slightly different. So please bear with me ...

Purchase price: $500,000
Purchase year: 2010

Property was rented for 6 months before becoming PPOR.

If the property sells now for $700k, how is the CGT calculated? Thanks.

Please feel free to let me know if you require other information. Thanks again!

 

[wylie]

CGT will be apportioned by the percentage of time it was an IP and PPOR.

 

[cadence]

so very roughly, assume 48 months since original purchase

(700k-500k) / 48mths x 6mths =$25k

so pay tax on $25k of gain?

 

[Terry_w]

Wylie is correct

approx 4 years passed, approx 1/8th will be subject to CGT.

 

[eek]

Just thinking out loud - so the CGT is pro-rata on a linear basis? Is there anyway to change that? haha

 

[jrc]

No, but you might be able to add costs such as rates, repairs, interest attributable to period after property became nonincome producing to your cost base. Get advice from an accountant

 

[Paul@PFI]

jrc raises a good point. Its often overlooked...Especially where a PPOR isnt rented. All ownership costs during a period where the property wasnt occupied as main residence OR tenanted wont be deductible BUT can be used to increase the cost base.

Cadence, All capital improvements will increase cost base regardless. Dont forget selling costs, acquisition costs (duty + legals) and also consider if a cap allowance adjustment affects you. If you claimed CA you cost base will have changed!!

That and a election to treat a property other than the MR as a MR...In otherwords dual MR issues. You can choose the one which is your MR by election. (You lodge return on that basis).

A good example is a holiday cottage. Lets say its Avoca.value $3.5m Your MR is valued at $1m...It may be wise to elect to treat Avoca as the MR and leave the other to CGT. The "other" would also have rates, taxes etc as increases to cost base. Even interest. Ignore capital allowances as they get added back anyway so its zero sum. Something to run past your tax agent or if you dont have one find one.

There is one class of taxpayer now affected by non-linear CGT. Non-resident taxpayers !! They lost their GST 50% discount unless they got a valuation dated 8May12. Since that date the CGT applies to 100% gain but the gain pre-May12 is protected. No valuation ??? get one !!

 

[cadence]

thank you all so much for responding!!! really appreciate it!!!

wow ... more complicated than i thought ....

 

[Scott No Mates]

thank you all so much for responding!!! really appreciate it!!!

wow ... more complicated than i thought ....

If things were simple then we wouldn't have a tax act which doubles as an anchor.