Capital Gains on private residence when rented

[bram]

Lived in house for 9 years, thinking of renting it out, am wondering if CGT goes on purchase price or on market value when first tenanted,regards David.

 

[Imagine]

There is a CGT Exemption if you have bought a property moved in straight away, (so it was not rented prior to you moving in), you can rent out your property for 6 years continuously and claim tax deductions for any expenses incurred, ie. interest on mtg etc but you also have to declare the rental income as assessable income. Provided that you do not sell another property in the 6 year rental period at the same time you are selling this one you are CGT exempt as you are treating this property as your main residence!

i hope this helps!

 

[bram]

Thanks for your reply, it has helped, decided to go ahead and do it, regards David.

 

[Monopoly]

There is a CGT Exemption if you have bought a property moved in straight away, (so it was not rented prior to you moving in), you can rent out your property for 6 years continuously and claim tax deductions for any expenses incurred, ie. interest on mtg etc but you also have to declare the rental income as assessable income. Provided that you do not sell another property in the 6 year rental period at the same time you are selling this one you are CGT exempt as you are treating this property as your main residence!

Imagine,

Sorry to throw a spanner in the works, but....

It is ONLY if you do not CLAIM another property as your main residence during this 6 years period, that the exemption still applies. That is because, you are only permitted to have one main residence (PPOR) at any one time, unless it is within a 6 month transition period whereby (say for example) you may be selling one PPOR and waiting to settle (move into) a new one.

You can selling as many IPs at one time as you have available to do so, however the exemption can only be applied to ONE, and only if it is your PPOR (or was rented out for <6 years) ...PLUS that you are not living in/claiming another PPOR simultaneously.

Cheers,

Jo

 

[noddy]

With the 6 year CGT exemption, are you allowed to claim depreciation still? Normally depreciation adjusts the CGT base cost, but with CGT exemption, how is depreciation handled?

 

[DaleGG]

Hi Noddy

Yes, you can claim depreciation on your tax returns whilst the property is rented and, no, it will not have an impact on the CGT calculations if the property is still your PPOR.

Bye the way, and I apologise if you are aware of this already, but, there are two types of depreciation - on plant and on buildings.

It is only the depreciation on buildings that affects the cost base of an asset fro CGT purposes, and, only if the property was bought after 13 May 1997.

Cheers

Dale

 

[amokk20us]

Hi Dale and forum members

Just to be crystal clear on this topic....

CGT exemption will still apply if I claim Interests on mortgage and expenses against a PPOR even though it is been rented??? (Providing I lived in it for 6 months and moved back in with 6 years)

I always thought that if a property was idenitified as a PPOR you can not make "ANY" tax deductions/writeoffs on it???

EDIT: OK I've done some searching on the forum, and I've come to the conclusion.

- If I purchase a unit as a PPOR and rent it out after 6 months of residency, any expenses I incurr after the unit has been rented is deductable, providing I list the rent as a taxable income.

THEN if I was to move back into the unit in 5 years time and during this time I have not purchased another PPOR, I should be exempt from CGT??

Is this Correct??


Amokk20us

 

[beech]

Yes,
but get a valuation done before you do move out just in case you DONT ever move back in because you found the house of your dreams elsewhere and you dont want to sell your original ppor because its a great rental property.

 

[Monopoly]

If I purchase a unit as a PPOR and rent it out after 6 months of residency, any expenses I incurr after the unit has been rented is deductable, providing I list the rent as a taxable income.

THEN if I was to move back into the unit in 5 years time and during this time I have not purchased another PPOR, I should be exempt from CGT??

Is this Correct?? [/b]

Yes that's correct.

Furthermore, I would like to emphasise the point made by beech, and that is to get an evaluation done BEFORE you move out, which will be needed to calculate the cost base value in the event of selling.

Here is a handy CGT calculator that will also help determine which is the more viable method to use when calculating the (least) amount of CGT payable.

http://www.cch.com.au/cgi-bin/cgt00isapi.dll/

Cheers,

Jo

 

[amokk20us]

Thank You Beech and Jo!